Japan GDP

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Japan: GDP contracts in Q2

August 17, 2015

GDP fell 1.6% in Q2 over the previous quarter in seasonally adjusted annualized terms (SAAR), which contrasted the 4.5% increase tallied in Q1 (previously reported: +3.9% quarter-on-quarter SAAR). The print was broadly in line with the 1.8% drop that market analysts had expected and represented the largest decline in a year. On an annual basis, economic activity expanded 0.7% in Q2 (Q1: -0.8% year-on-year), which marked the strongest growth since Q1 2014.

Q2’s drop reflected weaker domestic demand and a deteriorating external sector. Private consumption fell 3.0% in Q2 (Q1: +1.4% qoq SAAR), while public spending accelerated to a 1.7% increase (Q1: +1.0% qoq SAAR). Gross fixed capital formation moderated to a 3.2% increase in Q2 (Q1: +7.2% qoq SAAR), while private non-residential investment registered a mild 0.3% decline (Q1: +11.7% qoq SAAR).

Exports of goods and services plummeted at the sharpest pace since Q2 2011, falling 16.6% over the previous quarter in annualized terms (Q1: +6.7% qoq SAAR). Imports followed suit and declined 9.8% in Q2 (Q1: +7.4% qoq SAAR). As a result of the steep contraction in exports, the external sector’s annualized net contribution to overall growth fell from minus 0.3 percentage points in Q1 to minus 1.1 percentage points in Q2.

The Bank of Japan (BoJ) expects the economy to expand between 1.5% and 2.1% in the fiscal year 2015, which ends in March 2016. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.4% and 1.8%. FocusEconomics Consensus Forecast panelists see GDP expanding 0.9% in calendar year 2015, which is unchanged from last month’s projection. In 2016, the panel sees the economy growing 1.5%.


Author: Ricard Torné, Lead Economist

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Japan GDP Chart


Japan GDP Q2 2015

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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