Jul-Sep 2017 2nd Preliminary GDP Estimate

◆The real GDP growth rate for Jul-Sep 2017 (2nd preliminary est) received a major upward revision to +2.5% q/q annualized (+0.6% q/q) in comparison to the 1st preliminary report (+1.4% q/q annualized and +0.3% q/q), while at the same time significantly exceeding market consensus (+1.5% q/q annualized and +0.4% q/q). Demand components receiving upward revisions included private sector capital investment and inventories, which gained especially notable upward revisions in their contributions to GDP growth, government consumption, and public investment, which saw minor upward revisions. On the other hand, private sector housing investment suffered a slight downward revision.

◆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, 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.