Jul-Sep 2017 1st Preliminary GDP Estimate

◆The real GDP growth rate for Jul-Sep 2017 (1st preliminary est) grew for the seventh consecutive quarter by +1.4% q/q annualized (+0.3% q/q), pretty much in line with market consensus (+1.5% q/q annualized, +0.4% q/q). Continuing bad weather was influential, with categories such as personal consumption and public investment, which contributed to the acceleration of growth during the previous quarter, taking a negative turn. However, an increase in exports led growth in overall results. Terms of trade improved due to import prices settling down, and the GDP deflator grew for the first time in three quarters (+0.3% q/q) as a result of moderate progress in domestic price pass-through. Nominal GDP grew for the second consecutive quarter by +2.5% q/q annualized (+0.6% q/q).

◆We expect Japan’s economy to continue in a moderate expansion phase. Domestic demand is expected to continue its expansion centering on personal consumption, while overseas demand is expected to maintain steady growth backed by the recovery in the world economy, providing support for Japan’s economic growth. However, downside risk remains for overseas demand requiring caution, due to fears that China’s economy may slow down after the National Congress of the Communist Party in fall, and increased geopolitical risk. Meanwhile, we also urge caution regarding the slowdown of the US economy accompanying the Fed’s tight money policy, and the problem of capital outflows from the emerging nations.