Second Quarter Japanese Growth Not as Robust as Estimated Initially

September 12, 2017

In mid-August, Japanese officials stunned markets with an announcement that real GDP had expanded 4.0%, the most since a 4.6% annualized quarterly increase in the first quarter of 2015. Analysts were at the time expecting a pace of around 2.5%, and it turns out the market consensus was correct after all. Growth was revised downward by 1.5 percentage points (ppts) for the second quarter, 0.3 ppts to 1.2% for the first quarter, 0.1 ppts to 1.6% for the last quarter of 2016 and 0.4 ppts to 0.9% for the third quarter of last year. All these adjustments lopped 0.6 ppts off year-on-year growth in 2Q17, which had been reported a month ago as 2.0% but now is estimated to have been 1.4%.

Japanese growth since April 2013 when the Bank of Japan introduced quantitative stimulus has averaged 1.15% per year, 1.1 percentage points less than the concurrent growth rate of the United States. Japanese growth these past four years has also been lower than the 1.6% per annum pace of Japanese GDP expansion in the four years between 1Q09 and 1Q13.

A substantially smaller estimate of growth in non-residential business investment accounts for the bulk of the downward second-quarter revision to GDP growth. Instead of soaring 9.9% at an annualized rate between 1Q and 2Q, this component of aggregate demand went up 2.1%, enhancing the GDP growth rate by just 0.3 ppts instead of the initially reported 1.5-ppt contribution. Personal consumption made a slightly smaller contribution to the GDP growth rate than thought initially, and inventories and net exports exerted deeper drags.

The GDP price deflator was 0.4% lower than in the second quarter of 2016, which is the same amount of deflation as estimated before.

Copyright 2017, Larry Greenberg. All rights reserved. No secondary distribution without express permission.



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