Japan economy: Q1 GDP upgraded to 6.7%, driven by private investment
Published 10 June 2014
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0.1 Detail
The Cabinet Office upgraded Japan’s Q1 GDP from its initial estimate of 5.9% annualised rate (1.5% quarter over quarter, qoq) to 6.7% (1.6%) today. This was stronger than market expectations (5.5%). Private capital investment led the faster growth with 7.6% qoq (vs. first estimate of 4.9%), more than offsetting downward revisions in private inventories (from -0.2% pts contributions to -0.5% pts), and public investment (from -2.4% qoq to -2.7% qoq).
Household consumption was moderately revised up from 2.1% qoq to 2.3% qoq. The major driver for the robust growth (9.4% annualised) in household consumption was expenditure on durable goods which increased 64.4% annualised rate, due to advanced purchases to avoid additional taxes from the VAT hike in April.
Separately, the Ministry of Finance released April current account balance figures. The current account balance was 187.4 bn yen (£1.09bn) in surplus. This was a 76.1% fall from previous year, which was the lowest monthly surplus in April since 1985. The April trade deficit worsened by 72.2bn yen to 780.4bn yen (£4.5bn), dragging down the current account surplus further. The travel balance turned out to be a surplus (17.7 bn yen, £0.1bn) for the first time in 44 years against the backdrop of increasing foreign tourists, although this was nowhere near enough to offset the trade deficit. A 13.6% decline in income balance surplus (1.83 trillion, £11bn) contributed to the weaker current account surplus.
Comment
The markets’ reaction to faster growth was limited, as attention is now on whether the economy will rebound after the expected weak Q2 data. Markets are also looking towards the new Growth Strategy coming towards the end of June. Latest consensus forecasts predict that Q3 GDP should grow at 2.37% annualised after a 4.18% contraction in the second quarter. If that is the case, the Government is expected to stick to its scheduled VAT increase from 8% to 10% in October 2015. After today’s GDP release, Chief Cabinet Secretary Suga said ‘the data confirmed that economic foundations have been firm and the moderate economic recovery remains intact’.
0.2 Disclaimer
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