Weakening Japanese momentum behind strong GDP figures

Japan’s latest GDP report reveals some notable weakness in the economy despite the strong headline figures.

The preliminary reading of Japanese GDP for Q1 shows that the economy grew by 2.1% q-o-q annualised, beating the consensus forecast of -0.2%.

However, behind the strong headline figures, details of the GDP report reveal some broad-based weakening in momentum.

Declining corporate capex and sluggish household consumption both drag on domestic demand.

The seemingly strong net exports in Q1 were the result of a sharp decline in imports, which is unsustainable and points to further downside in exports ahead.

The upcoming consumption tax hike will add more headwinds to growth in Q4.

At this point, our 2019 Japanese GDP forecast remains at 0.8%. Given the elevated trade tensions between the US and China, the risks are clearly tilted to the downside.

Growth in Japanese Real GDP, 2012-2019

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