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Japan: Japan's economy exits recession in Q4; growth revised downward on falling investment

March 11, 2015

Although revised data confirmed that the Japanese economy exited recession in Q4, growth in the final quarter of 2014 was lower than initially expected. GDP expanded 1.5% in Q4 over the previous quarter in seasonally adjusted annualized terms (SAAR), according to new data released on 11 March. The reading was below the 2.2% increase reported in the first release. On an annual basis, economic activity fell 0.8% in Q4, which undershot the 0.5% drop tallied in the first estimate.

The downwardly revised figure showed that domestic demand was weaker than previously estimated, while the contribution to growth from the external sector was left unchanged. Although growth in both private consumption and public spending fared better compared to the initial estimate, expanding 2.0% (previously reported: +1.1% quarter-on-quarter SAAR) and 1.2% (previously reported: +0.4% qoq SAAR) respectively, a downward revision to investment drove down overall GDP. Gross fixed capital formation declined 0.1% (previously reported: +0.1% qoq SAAR) and private non-residential investment contracted 0.3% (previously reported: +0.4% qoq SAAR).

The Bank of Japan (BoJ) expects the economy to expand between 1.8% and 2.3% in the fiscal year 2015, which ends in March 2016. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.5% and 1.7%. FocusEconomics Consensus Forecast panelists see GDP expanding 0.9% in calendar year 2015, which is down 0.1 percentage points from last month’s projection. In 2016, the panel sees the economy growing 1.5%.


Author: Ricard Torné, Head of Economic Research

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Japan GDP Q4 2014

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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