Apr-Jun 2014 2nd Preliminary GDP Estimate

◆The real GDP growth rate for Apr-Jun 2014 (2^nd preliminary est) was revised downward from the 1^st preliminary estimate (-6.8% q/q annualized, -1.7% q/q) to -7.1% q/q annualized (-1.8% q/q). As in the 1^st preliminary estimate, performance was in line with market consensus (-7.0% q/q annualized and -1.8% q/q). However, capex was revised downwards, while inventory investment was revised upwards, bringing a positive factor into the mix. Regarding the huge increase in inventory investment, this is considered to be partly an attempt to recover inventory levels after the temporary decline experienced as a result of last minute demand prior to the April tax hike, though the decline in domestic demand cannot be ignored as another major cause, hence this is not necessarily a positive element. Ultimately, performance was not as good as the figures make it look at first glance.

◆As for degree of contribution of domestic and overseas demand to the 2014 Apr-Jun period real GDP growth rate on a q/q basis, domestic demand contributed -2.9%pt (-2.8%pt on the 1^st preliminary), while overseas demand contributed +1.1%pt (also +1.1%pt on the 1^st preliminary). There is no major change from our conclusions on the 1^st preliminary estimate, in which we referred to the major slump in the economy in the Apr-Jun period, due mainly to the reactionary decline in personal consumption which occurred after the increase in the consumption tax. The results did not prompt us to change our basic view of the economic environment.