Domestic Demand in Japan
Japan - Domestic Demand
Domestic demand leads growth in Q1
Improving domestic demand, coupled with resilient activity in the all-important external sector, propelled growth at the outset of the year. GDP rose 2.2% in Q1 over the previous quarter in seasonally adjusted annualized terms (SAAR), which was above the 1.4% increase recorded in Q4. Q1’s increase exceeded the 1.7% expansion that market analysts had expected and represented the fastest rise in one year. On an annual basis, the economy expanded 1.6% in Q1 (Q4: +1.7% year-on-year).
Private consumption recovered in Q1 after nearly stagnating in Q4 (Q4: +0.2% quarter-on-quarter SAAR; Q1: +1.4% qoq SAAR). That said, there is widespread skepticism whether households will be able to sustain Q1’s healthy performance in the quarters ahead as wage growth remains limited. Adding to these concerns, investment growth weakened at the outset of the year. Growth in private non-residential investment slowed markedly to 0.9% (Q4: +7.6% qoq SAAR), while gross fixed capital formation expanded a softer 1.0% (Q4: +2.6% qoq SAAR).
A competitive yen and robust global demand caused exports of goods and services to expand a strong 8.9% in Q1 (Q4: +14.1% qoq SAAR). Imports grew 5.5% (Q4: +5.3% qoq SAAR) on the back of rising prices for raw materials.
Japan’s export-driven recovery is highly vulnerable to external demand swings. In this regard, uncertainty regarding economic policies in the United States and signs that the uptick in the global production cycle could come to an end have the potential to put a dent in overall growth. Moreover, Japan’s tight labor market has not yet translated into more cash in households’ pockets. This factor, coupled with slightly higher inflation, is eroding consumers’ purchasing power, preventing any significant and sustained recovery in consumer spending.
The Bank of Japan (BoJ) expects the economy to expand between 1.4% and 1.6% in the fiscal year 2017, which ends in March 2018. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.1% and 1.3%. FocusEconomics Consensus Forecast panelists see GDP expanding 1.2% in calendar year 2017, which is up 0.1 percentage points from last month’s projection. In 2018, the panel sees the economy growing 0.9%.
Japan - Domestic Demand Data
|Domestic Demand (annual variation in %)||0.8||2.3||2.4||0.3||0.7|
5 years of economic forecasts for more than 30 economic indicators.
|Bond Yield||0.05||4.26 %||May 24|
|Exchange Rate||111.5||-0.25 %||May 24|
|Stock Market||19,743||0.66 %||May 24|
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May 26, 2017
In April, the core consumer price index in Japan was flat from the previous month in seasonally-adjusted terms, matching the result in the previous two months.
May 24, 2017
The Nikkei Flash Manufacturing Purchasing Managers’ Index (PMI) fell from April’s revised 52.7 (previously reported: 52.8) to 52.0 in May.
May 22, 2017
Nominal exports in Japan valued in yen increased 7.5% from the same month last year in April, following March’s 12.0% increase.
May 17, 2017
Although core machinery orders (a leading indicator of capital spending over a three- to six-month period) expanded for the second consecutive month in March, they weakened in Q1 compared to Q4 2016, suggesting that businesses investment likely weakened in the three months up to March.
May 16, 2017
Improving domestic demand, coupled with resilient activity in the all-important external sector, propelled growth at the outset of the year.