Japan: Stronger investment pushes up Q2 GDP
September 8, 2016
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.