This morning Japan’s first preliminary estimate of Q1 GDP was published, which showed that growth dropped by 0.2% q/q, marking the first decline since 2015Q4, notes the research team at Rabobank.
“Lower domestic demand was the main driver of the drop, while net exports contributed slightly positive. Following this, it seems that the best growth streak since the late 1980s has come to an end. But one has to note that there previously have been significant revisions to quarterly GDP data.”
“For the quarters ahead we expect growth to rebound based on accommodative monetary and fiscal conditions. But given that the economy is already running into capacity constraints (BoJ’s own output ‘gap’ estimate surged to +1.5% in 2017Q4), we foresee slower growth than last year.”
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