Japan: Strong growth in Apr-Jun quarter looks unsustainable – Nomura

Japan’s second preliminary estimates of real GDP for 2018 Q2, released on 10 September, put annualized q-q growth at +3.0%, an upward revision from the annualized growth figure of +1.9% given in the first preliminary estimates, notes Takashi Miwa, Research Analyst at Nomura.

Key Quotes

“The new growth estimate turned out to be higher than both the Bloomberg median forecast of +2.6% and our forecast of +2.3%.”

“The q-q growth figure for real private-sector capex was revised up from +1.3% in the first set of preliminary GDP estimates to +3.1% in the second set; this was the primary factor in the upward revision to the estimated rate of growth in real GDP.”

“We do not expect the strong growth observed in Q2 to be sustained into Q3, as we expect growth in household consumption and real exports to slow as a result of the multiple natural disasters that have befallen Japan, including the heavy rains that hit the western part of the country in July, the typhoon that struck in September, and the earthquake that struck the eastern part of the Iburi region of Hokkaido just days later.”

“We also expect the private-sector capex that was behind the upward revision to Q2 real GDP growth to slow going forward, in tandem with a mild slowdown in global economic growth.”

“We accordingly still think that Japan's economic growth is also on course for a mild slowdown.”