Investment Clock insights

Japan GDP figures

Ian Kernohan

17 August 2015

The first estimate of Japan GDP showed a fall in Q2, after a strong rise in Q1.  Unlike 2014, when VAT was hiked, there appears to be no particular catalyst for the decline, although Japan does have a history of volatile quarterly GDP data.  Giving some context to the numbers, exports were hit by the slowdown in emerging economies and the hiatus in US domestic demand, while consumption dropped for the first time in four quarters, perhaps impacted by poor weather. 

Looking ahead, low unemployment and a pick-up in real and nominal income growth should support GDP in H2, as will a recovery in US domestic demand.  The main business surveys, including the important Tankan survey, are pointing towards continued growth.  Our base case assumes GDP growth of 1% for the year as a whole.  As a team, we are overweight Japanese equities, on the basis of continued economic recovery and loose monetary policy. We are confident the modest recovery will continue, despite the disappointing  Q1 GDP report.  A broader range of indicators suggests Japan’s economy is set to expand at a reasonable pace in 2016 and the GDP report increases the odds of even more monetary easing later in the year.

Japan GDP

The value of your investment and the income from it is not guaranteed and can fall as well as rise. This article is for professional customers only. The views expressed are the author’s own and do not constitute investment advice.