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Oct-Dec 2016 2nd Preliminary GDP Estimate

GDP revised upwards to +1.2% q/q annualized (+0.3% q/q) centering on capex

Shunsuke Kobayashi

Summary

◆The real GDP growth rate for Oct-Dec 2016 (2nd preliminary est) was revised upwards to +1.2% q/q annualized (+0.3% q/q) in comparison to the 1st preliminary report (+1.0% q/q annualized and +0.2% q/q), while at the same time falling below market consensus (+1.6% q/q annualized and +0.4% q/q). Major revisions in comparison to the 1st preliminary report in terms of performance by demand component are as follows: fluctuations in private sector inventory, private sector housing investment, and public investment were all revised downwards, while private sector corporate capital investment and private sector consumption were revised upwards, bringing upward pressure on overall results.


◆Though revised figures did not reach the level of market consensus, the main cause is considered to be advances achieved in inventory adjustment, and hence should not be cause for excessive pessimism. With an upward revision centering on capex, the most important development of note is the Japanese economy’s gradual shift to more balanced growth, driven by both domestic and overseas demand rather than by overseas demand alone. Our main scenario for Japan’s economy is reconfirmed by these results, which show the economy to be heading for a comeback after having been in a temporary lull.

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