Japan Q1 GDP revised up slightly to 2.2% annualized on firmer capex

10, Jun. 2019

TOKYO, NNA - Japan's economic growth for the January-March quarter was revised up slightly as business investment in equipment turned out to be firmer than initially estimated.

The Cabinet Office released revised (second preliminary) Q1 GDP data on Monday, based on a key government survey released a week ago and other data.

Key points:

―― Q1 GDP growth was revised up to 0.6 percent quarter on quarter, or an annualized 2.2 percent, up slightly from the official preliminary reading of 0.5 percent q/q, and an annualized 2.1 percent, reported last month. Both figures came in as expected by economists.

―― The preliminary data had showed Japan’s Q1 economic growth was much stronger than forecast, but that was led by the first net-export gain in a year due to a sharp drop in imports and a smaller-than-expected decline in capital investment. Exports slumped, posting the first quarter-on-quarter drop since July-September 2018, amid global uncertainty caused by the U.S.-China trade dispute.

―― In Q1, capital investment was revised up to a 0.3 percent rise q/q (the median economist forecast was +0.5 percent) from a preliminary 0.3 percent drop, based on the results of the Ministry of Finance's quarterly survey released on June. 3. Its contribution to GDP was also revised up to +0.1 percentage point from zero (-0.0 percentage point).

―― Private consumption, which accounts for about 60 percent of GDP, was unrevised at a 0.1 percent q/q decline, making zero contribution (-0.0 percentage point) to total domestic output.

―― The contribution of private-sector inventories to Q1 GDP was also unrevised at +0.1 percentage point.

―― Net exports of goods and services -- exports minus imports -- made a positive 0.4 percentage point contribution to total domestic output, unrevised from the preliminary estimate.

―― On the downside, government investment was revised down to a 1.2 percent increase q/q (the median forecast was +1.1 percent) from a 1.5 percent rise. The positive 0.1 percentage point contribution was unrevised.

Takeaway:

―― Looking ahead, Japan's lukewarm economic growth is expected to lose some steam in the April-June quarter in light of sluggish exports and industrial production. Both private economists and government officials project the sales tax hike from 8 percent to 10 percent planned in October will have only a limited negative impact on consumption.