Japan GDP Q1 2017


Japan: Q1 GDP growth revised down, although the economy still looks fairly healthy

June 8, 2017

The Japanese economy expanded at a weaker rate than previously reported in Q1, as private consumption growth was slower than in the initial estimate and inventories recorded a sizeable drop, according to revised data released on 8 June. GDP rose 1.0% in Q1 over the previous quarter in seasonally adjusted annualized terms (SAAR), which was below the 2.2% increase reported in the first release. The print undershot Q4’s result of 1.4% growth and marked the lowest print since Q4 2015. On an annual basis, economic activity rose 1.3% in Q1. The print was down from the 1.6% increase reported in the first estimate and marked a deceleration from Q4’s 1.6% rise.

The downwardly adjusted figure reflected a sharp decline in the contribution of private inventories to growth, with private inventories subtracting 0.6 percentage points from overall output in Q1. Although the expansion in private consumption was weaker than previously thought, it still marked a sizeable acceleration from Q4’s reading, when household spending nearly stalled. Consumption is being pushed up by gradually improving wage growth and record-low unemployment. Healthy demand for Japanese goods and the Central Bank’s accommodative monetary policy caused private non-residential investment to expand at a stronger rate than in the initial estimate, representing an encouraging sign for economic activity this year. The contribution from the external sector to overall growth was unchanged.

Despite the downward revision, strong investment growth and healthy dynamics in the external sector are expected to support the economy this year. Moreover, Q1’s reading represented the fifth consecutive quarterly expansion in national output, the longest such run in over a decade.

The Bank of Japan (BoJ) expects the economy to expand between 1.4% and 1.6% in 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%.


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Japan GDP Chart

Japan GDP Q1 2017 0

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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