Oct-Dec 2013 First Preliminary GDP Estimate

◆The GDP growth rate for the Oct-Dec 2013 period was up by 1.0% q/q annualized (+0.3% q/q), thereby achieving positive growth for the fourth consecutive quarter. However, it fell well below market consensus (up 2.8% q/q annualized and up 0.7% q/q). This was due mainly to personal consumption, which had been expected to achieve major growth but ended up falling below the market outlook. However, all demand components except for private inventories saw q/q growth, so overall, results were not bad.

◆As for the outlook for the Japanese economy, the period of Jan-Mar 2014 is expected to see a major increase in the growth rate due to the effect of last minute demand on personal consumption. The Oct-Dec 2013 GDP figures have been pushed up a certain amount due to last minute demand especially in the area of housing investment and durable goods. Meanwhile, immediately before the upcoming tax hike, non-durables and semi-durables are also expected to see last minute demand, putting increasing upward pressure on growth. But then a reaction to last minute demand in the form of a downturn is thought to be inevitable, so the period of Apr-Jun 2014 will likely see a decline in real GDP. However, exports, which moved into a growth trend this time around, are expected to strengthen that trend as overseas economies, lead by the U.S., continue to expand, and as Japan improves its global competitiveness thanks to the weak yen. Meanwhile, increasing exports will lead to production growth and improved earnings, and this is expected to trigger more CAPEX. This in turn should lead to an increase in wages, and could also lead to a recovery in household budgets. We believe that the Japanese economy will be back on the growth track by the period of July-Sept 2014.