Oct-Dec 2014 1st Preliminary GDP Estimate

◆The real GDP growth rate for Oct-Dec 2014 (1^st preliminary est) grew by +2.2% q/q annualized (+0.6% q/q). This is the first time growth in GDP has been recorded in three quarters, and confirms that the economy is finally back on track after a period in the doldrums. However, despite the positive growth rate, performance fell below market consensus (+3.7% q/q annualized and +0.9% q/q), leaving a somewhat negative impression. One of the main factors behind results falling below market predictions was the fact that growth in personal consumption was not nearly as high as had been originally expected.

◆Performance by demand component shows personal consumption up +0.3% q/q, its second consecutive quarter of growth. Real employee compensation was up by +0.1% q/q for the second consecutive quarter, meaning that personal consumption will continue to make a gradual comeback with the help of improvements in the employment and income environment. However, the market forecast had been expecting an acceleration in growth rate, and this figure remains at about the same level as the Jul-Sep period, a result lacking in real strength.

◆Results for the period showed considerable growth for real GDP, its first positive growth in three quarters. This indicates that Japan’s economy is heading toward a comeback after a period of decline following the increase in consumption tax last year. We expect real GDP to continue this growth trend during the Jan-Mar 2015 period and beyond. We expect Japan’s economy to continue expanding gradually. We also see personal consumption continuing in a growth trend due mainly to improvements in real employee compensation, conditions positively influencing households. Meanwhile, the price of crude oil which has experienced steep declines since the summer of 2014 will bring downward pressure on consumer price, providing added support to growth in personal consumption, which is in turn affected by rising real wages.