Alvin Liew
[email protected]
Global Economics & Markets Research
Email: [email protected]
URL: www.uob.com.sg/research
Flash Notes
Thursday, 18 May 2017
Japan 1Q17 GDP: Growth Extends 5 Quarters, Best Run Since 2006
External Demand Remains A Growth Pillar For Japan In 1Q While Private Consumption Rebounded From Lacklustre 4Q
Performance And Residential & Non-Residential Investments Both Etched Out Small Gains To Help Japan Extend The
Best Stretch Of GDP Growth Since 2006
Prelim data showed that Japan’s 1Q 2017 GDP grew by 0.5%q/q, 2.2%q/q SAAR, the fifth straight quarter of sequential
expansion, better than the Bloomberg median forecast of 0.5%q/q, 1.7% q/q SAAR. The other positive in Japan’s growth was that
4Q 2016 growth was also revised higher to 1.4%q/q SAAR (from 1.2% previously). This is the longest stretch of GDP expansion in
10 years, since 2006 when Japan was under the former Prime Minister Junichiro Koizumi. Compared to the same period one year
ago, the Japanese economy grew by 1.6%y/y in 1Q (from +1.7% in 4Q and +1.1%y/y in 3Q).
Other than continued exports strength (which expanded 2.6%q/q, 8.9% q/q SAAR in 1Q) sustaining 1Q growth, GDP in the first
quarter was also helped by a rebound in private consumption (+0.4%q/q, 1.4%q/q SAAR in 1Q from near 0% in 4Q). And while the
contribution was negligible from business spending, it should be noted that the segment still etch out slight gain of +0.2%
(exceeding forecast for -0.4%q/q) after enjoying a strong quarter of business spending in the preceding quarter (+1.9%q/q in 4Q).
Meanwhile, housing investment growth re-accelerated slightly to 0.7%q/q in 1Q (from +0.2% in 4Q). Overall, the first quarter growth
was still supported by external demand (+0.1ppt) while domestic demand provided the bigger contribution this time (0.4ppt). We are
mindful that 1Q 2017 growth may still be subject to revision in the second preliminary report due on 8 June 2017.
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The sustained pickup in global export demand from the 2 half of 2016 to 1Q 2017 was a positive surprise and despite the latest
safe-haven demand driven by US domestic political uncertainty, the USD/JPY is still above 110 (as of 18 May 2017), so these 2
factors continue to bode well for the export-oriented Japan economy even as geo-politics continue to cloud external demand
outlook under the era of Trump administration. In addition, even as we see a rebound in domestic private consumption in 1Q, we
still have ours concerns about domestic consumer weakness in Japan as reflected in the recent decline in nominal and real wages
in Japan. We are also concerned about a resumption of anemic business spending outlook.
We still expect 2017 GDP growth to be at 0.9%, comparable to the growth achieved in 2016 (+1.0%) and supported by export
recovery that will have positive spillover to the manufacturing sector but key risks ahead for Japan will be geo-politics, from Trump’s
US economic & foreign policy to European political developments & the on-going developments in the Korean Peninsula, which
may hamper business investment & trade outlook. An anchor for Japan’s 2017 growth may also come from public sector
investment via effects of the fiscal boost from the stimulus package announced in August 2016.
Please see the Cabinet Office report for the 1Q 2017 GDP (1st estimate) released on 18 May 2017.
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