Japan: Q2 sees final demand-driven acceleration - BNPP

Solid consumption and capex, coupled with public investment and inventory, should drive Japan’s annualised growth of 2.7% in Q2, according to analysts at BNP Paribas.

Key Quotes

“The preliminary (first estimate) GDP report for Q2 2017 (due out on 14 August) should show that real GDP accelerated to 0.7% q/q (2.7% annualised) from 0.3% in Q1 (1.0% annualised). The rise reflects a large positive contribution from inventory and the government’s increased fiscal spending. The report will confirm that, while overseas demand has paused in its robust recovery, Japan continues to expand above trend thanks to the strength of private final demand, as private consumption and capital investment are both growing.”

“Exports contracted for the first time in a year, but there are signs that the source of the weakness, electrical machinery, could shortly see improved exports and production.”

“Thanks to the global recovery and domestic public investment, we expect Japan’s economic outperformance to continue for the time being.”