Japan: Real GDP up for eighth consecutive quarter – Nomura

Takashi Miwa, Research Analyst at Nomura, note that Japan’s real GDP in 2017 Q4 (Oct-Dec) grew by an annualized 0.5% q-q and the pace of growth was slower than the market consensus forecast (Bloomberg median of +1.0%) as well as their forecast (also +1.0%).

Key Quotes

“Domestic demand fell short of market expectations, contributing only 0.1ppt to real GDP growth, but the strength of domestic demand relative to overseas demand was much as the market had forecast (overseas demand contributed -0.0%). The shortfall in overall growth relative to consensus lay in slowerthan-expected real growth in housing investment and capex.”

Real GDP up for eighth consecutive quarter, although growth slightly slower

Annualized q-q real GDP growth in Oct-Dec 2017 was somewhat slower than it had been over the preceding four quarters, when it averaged 1.9%. In our reading of the data, however, underlying growth still looks healthy, as real growth in Oct-Dec was pulled down significantly by the negative contribution of private-sector inventories and a 2.9% q-q increase in real imports. 2017 Q4 marked the eighth consecutive quarter of qq growth in real GDP.”

Focus on whether growth holds up to exogenous shocks

We see reasons to expect further improvement in the picture of external demand for Japan's economy, including the 9 February passage by the US Congress of a budget deal that includes a sharp increase in fiscal outlays. In assessing whether economic growth continues uninterrupted, however, we think the key concern is whether the economy holds up against such exogenous shocks as the unfavorable weather that has hit Japan since the start of 2018 and the instability in financial markets exemplified by the February plunge in stock prices.”

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