Japan: First negative quarterly growth in real GDP in 9 quarters - Nomura

Japan's 2018 Q1 (Jan-Mar) first preliminary GDP estimates showed real GDP growth of - 0.6% q-q annualized, the first negative growth in nine quarters, notes the research team at Nomura.

Key Quotes

“This figure is worse than the consensus (Bloomberg survey median) forecast of -0.1% q-q annualized, but in line with our forecast.”

“Comparing the different components of demand with our earlier forecasts, the q-q decline (-0.1%) in real private-sector capex and the q-q rise (+0.0%) in real public fixed capital formation both come as something of a surprise.”

“The negative growth looks to have been largely driven by deterioration in consumer spending and a slowdown in exports, which is more or less in line with what we had been expecting. Real private-sector final consumption was down slightly (-0.0% q-q) and real exports slowed from +2.2% q-q in 2017 Q4 to +0.6% in 2018 Q1.”

Negative growth will likely prove temporary, in our view

Our assessment of the factors seemingly behind the negative growth is that the deterioration in consumer spending is likely due to curbed spending owing to poor weather conditions in Japan, such as heavy snowfall, and the slowdown in exports likely reflects a temporary slowdown in overseas economies. Bearing this in mind, we believe that the negative growth in real GDP seen in Q1 is likely to be limited to that quarter, and we expect a return to positive growth from Q2.”

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