Japan: Q1 GDP likely to decline by 0.6% - Nomura

Analysts at Nomura estimate Japan’s Q1 (January-March) real GDP figures to show a decline of 0.6% q-o-q annualized (-0.1% q-o-q), which would be the first such decline since October-December 2015 (nine quarters).

Key Quotes

“We think domestic demand was weak overall in January-March.”

“We expect overseas demand, which has been fueling real GDP growth, to slow for now. Based on Ministry of Finance trade statistics and the BOJ's export and import price data, we estimate January-March 2018 real exports grew by 0.3% q-o-q, which is considerably weaker than the 2.5% q-o-q growth in October-December 2017 (adjustments for seasonal factors and prices are by Nomura). Economic conditions overseas appear to have slowed overall in January-March, with PMI indicators in China and Europe falling off from the January peak and the March PMI in the US below February levels. We think these conditions contributed to a slowdown in Japan's real exports.”

“We estimate real consumer spending fell quarter-on-quarter.”

“We think real housing investment and real public spending also continued to weigh on real GDP, but that real capex in the private sector remained on a modest growth trajectory.”

“We think real GDP growth was negative for the first time in nearly two years, but we see as our main scenario that the drop in real GDP will be limited to January-March 2018. Starting in April-June, we expect expansionist fiscal policies in the US to support US domestic demand, which should underpin the global economy. We expect the Japanese economy to resume growth in April-June, in line with these developments.”