Japan: Five quarters of uninterrupted growth – Wells Fargo

The Japanese economy expanded at a  2.2 annualized rate in Q1—marking five quarters of uninterrupted growth, a difficult feat for the country to accomplish, according to the analysts at Wells Fargo.

Key Quotes

“Consumer spending was the largest contributor to growth. Retail sales for the first three months of the year have steadily increased, growing at the fastest pace since April 2015.”

“Businesses are starting to feel more confident in the country’s economic outlook, with business investment increasing at a 1.0 percent annualized pace in Q1. Although modest, it marks the third straight quarterly gain—the longest winning streak for cap-ex since 2014.”

“Inflation moved further away from the Bank of Japan’s 2 percent target and remains uncomfortably low with the overall rate of CPI inflation rising to 0.4 percent year over year in April. Muted inflation growth suggests that the Bank of Japan (BoJ) will uphold its dovish policy until inflation nears its 2 percent target. Furthermore, the BoJ is expected to maintain its Quantitative and Qualitative Easing (QQE) program for the foreseeable future.”

“The U.S. backing out of the Trans Pacific Partnership was a blow to Japanese trade prospects, although Japan is still benefitting from trade even without the alliance. Exports swelled again in Q1, adding to overall growth despite a jump in imports. Some of trade’s strength was due to the Chinese boycott of South Korean goods and a shift to Japanese goods. Exports to China surged in February and rose again in March.”