Japan GDP Q2 2016


Stronger investment pushes up Q2 GDP

The Japanese economy expanded at a faster rate than previously reported as investment fared better than initially thought, according to revised data released on 8 September. GDP rose 0.7% in Q2 over the previous quarter in seasonally adjusted annualized terms (SAAR), which was above the 0.2% increase reported in the first release but represented a deceleration over the 2.1% expansion in Q1. On an annual basis, economic activity rose 0.8% in Q2. The print was up from the 0.6% increase reported in the first estimate and marked an acceleration over Q1’s 0.2% expansion.

The upwardly-revised figure showed that growth in gross fixed capital formation was stronger than in the previous estimate report (first estimate: +3.7% quarter-on-quarter SAAR; second estimate: +4.6% qoq SAAR). Moreover, inventories contributed positively to the overall GDP figure and private consumption recorded slightly faster growth (first estimate: +0.6% qoq SAAR; second estimate: +0.7% qoq SAAR). The contribution to growth from the external sector was unchanged at minus 1.0 percentage points.

Despite the faster expansion, growth remains tepid in Japan mainly due to a rising yen and lackluster global demand. Against this backdrop, the government launched a new stimulus package of JPY 28.1 trillion (USD 279 billion) on 2 August to rekindle economic growth. Given Japan’s poor economic dynamics and resurfacing deflationary pressures, analysts are pricing in further monetary stimulus by the Bank of Japan.

The Bank of Japan (BoJ) expects the economy to expand between 0.8% and 1.0% in the fiscal year 2016, which ends in March 2017. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.0% and 1.5%. FocusEconomics Consensus Forecast panelists see GDP expanding 0.5% in calendar year 2016, which is unchanged from last month’s projection. In 2017, the panel sees the economy growing 0.8%.

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Japan GDP Chart

Japan GDP Q2 2016 2

Note: Quarter-on-quarter seasonally adjusted annualized changes and annual variation of GDP in %.
Source: Cabinet Office (CO) and FocusEconomics Consensus Forecast.

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