Japan: Q4 2017 real GDP growth likely to be 1.0% – Nomura

Analysts at Nomura expect Q4 (October-December) 2017 real GDP growth was 1.0% q-o-q annualized (0.2% q-o-q) for Japanese economy, which would be the eighth consecutive quarter of q-o-q growth.

Key Quotes

“Our overall view is that growth in private sector demand has been firm, while public sector demand has been on the weak side. We also believe external demand’s contribution (which has boosted real GDP growth in many quarters up until the latest set of data) will likely be close to zero, with imports having shown particularly sharp growth.”

“We estimate that private sector demand was generally quite brisk in Q4 2017. Consumer spending proved quite weak during summer, but there appears to have been a rebound in Q4, most notably in services-related spending. We also expect capex to have risen. Construction investment looks to have been sluggish, but we believe firm exports likely boosted machinery investment.”

“Meanwhile, we estimate that public sector demand was quite sluggish. Public investment grew sharply in H1 2017 on the execution of the second FY16 supplementary budget, but with these already having run their course, we expect there to have been a decline in Q4 (following on from a similar fall in Q3). Core statistics also suggest that private sector housing investment continues to trend on the weak side, and we expect there to have been another q-o-q decline in this category.” 

“As overseas economic conditions were quite healthy in Q4, we believe growth in exports from Japan was also likely quite strong. That said, imports rose sharply in December, with the result being that overseas demand’s contribution (which has boosted real GDP growth in many quarters) was likely somewhere close to zero.”

“While we expect there to have been positive growth for an eighth-straight quarter overall, growth is likely to be more moderate in Q4 compared with previous quarters which had exceeded the potential growth rate.”

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