GDP per capita in Japan

Japan - GDP per capita (U.S. Dollars)

Economy grows quickly in Q2 but at a slower pace than originally estimated

The economy expanded at a weaker rate than previously reported in Q2, following a downward revision in domestic demand. GDP rose 2.5% over the previous quarter in seasonally-adjusted annualized (SAAR) terms—lower than the 4.0% increase originally reported but higher than Q1’s 1.2% rise. Domestic demand expanded 3.8% in Q2, much slower than the 5.2% originally reported but also higher than Q1’s 0.7% expansion. Q2’s revised rate of overall expansion undershot market analyst expectations of a 2.9% increase. Nevertheless, it represented the fastest rate of growth in more than two years. In annual terms, GDP grew 1.4% in Q2, lower than the 2.0% expansion originally reported (Q1: +1.5% year-on-year).

The downward revision in domestic demand took its toll on the Q2 quarter-on-quarter economic expansion in SAAR terms notably because gross fixed investment grew only 7.1% (previously reported: +11.7% quarter-on-quarter SAAR). While growth in private consumption was revised down slightly to 3.4% (previously reported: +3.7% qoq SAAR), it still represented the fastest pace of expansion in over 3 years, pointing to a much-needed recovery in household spending.

The external sector, on which the Japanese economy is very reliant, saw little change in Q2’s revised release. Exports contracted an unchanged 1.9% in SAAR terms compared to Q1’s 8.0% expansion because of a stronger yen. Imports expanded a slightly higher 5.7% than the 5.6% expansion originally reported, compared to Q1’s 5.4% expansion. All in all, the external sector led to a net growth contribution of minus 1.2 percentage points in Q2, worse than the originally reported net contribution of negative 1.1 percentage points (Q1: plus 0.5 percentage points).

The Bank of Japan (BoJ) expects the economy to expand between 1.5% and 1.8% in fiscal year 2017, which ends in March 2018. In the subsequent fiscal year, the BoJ sees GDP growth of between 1.1% and 1.5%. FocusEconomics Consensus Forecast panelists see GDP expanding 1.4% in calendar year 2017, which is up 0.1 percentage points from last month’s projection. In 2018, the panel sees the economy growing 1.0%, which is unchanged from last month’s forecast.