Marcel Thieliant, Senior Japan Economist at Capital Economics explained that GDP growth slowed sharply last quarter and we think that the economy won’t expand as strongly this year as it did in 2017.
"According to today’s preliminary estimate, GDP edged up by 0.1% q/q last quarter (0.5% annualised). The result was a touch weaker than the Bloomberg median of 0.2%. While it marked the eight consecutive quarter of expansion, growth last quarter was much slower than the 0.6% q/q increase recorded in Q2 and Q3. Private consumption bounced back by 0.5% q/q following a fall in Q3, but net exports stopped boosting growth. And while non-residential investment recorded the fifth consecutive increase, stockbuilding provided a small negative contribution and public demand fell.
Business surveys suggest that activity accelerated at the beginning of 2018. However, we still think that the expansion will lose vigour this year as the economy is running into capacity constraints. We estimate that output was around 0.5% above its sustainable level last quarter. In fact, activity probably remained sluggish at the start of this year: firms were projecting a 4.3% m/m slump in industrial output in January and METI’s big data industrial production index showed a 3.7% m/m plunge last month. We are forecasting a 1.2% rise in GDP this year."
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