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MNI DATA PREVIEW: Japan Q1 GDP Seen Lower On Capex, Spending

MNI (London)
     TOKYO (MNI) - Japan's economy is expected to post a contraction in the
January-March period, hit by weak capital investment and private consumption.
     Economists are looking for preliminary Q1 GDP lower by 0.1% fall on
quarter, or an annualized -0.2%. That compares with the second preliminary
estimate of +0.5% q/q, or an annualized +1.9% for the fourth quarter of 2018.
     Forecasts ranged from -0.1% to +0.4% q/q, or -0.5% to +1.4% at an
annualized pace.
     The Cabinet Office will release preliminary GDP data for the January-March
quarter at 0850 JST on Monday, May 20 (2350 GMT on Sunday, May 19).
     --LOWER CAPEX, SPENDING
     Economists expect that Japan's economy was hit by weak capital investment
and private consumption in Q1 amid slowing demand and uncertainties over the
global economy, reversing from gains seen in Q4, although they expect weak
private demand to have been partly offset by firm net exports on the back of
weak imports.
     Economists expect private consumption, which accounts for about 60% of the
GDP, to have fallen 0.1% on quarter, compared with +0.4% in the fourth quarter.
Forecasts ranged from -0.2% to +0.1%.
     Capital investment during the first quarter is expected to have fallen 2.2%
q/q due to the cautious corporate stance from weak global demand, down from
+2.7% in Q4. Forecasts ranged from -3.0% to +0.6%.
     Capital investment by major manufacturers was weak in Q1 on the back of the
slowing China's economy. Some companies are putting off the implementation of
capex on the back of the continued uncertainties.
     However, the Bank of Japan's March Tankan survey showed solid capital
investment plans in the current fiscal year, although the plans will be revised
in June.
     The contribution of private-sector inventories to the total domestic output
is forecast to be unchanged from the 0.0% in Q4%.
     --STRONG NET EXPORTS
     Net exports of goods and services -- exports minus imports -- are expected
to have made a positive 0.3 percentage point contribution to the total domestic
output, reversing from -0.3 percentage point contribution in the fourth quarter.
     The expected rise of net exports during Q1 will be the first pick-up in
four quarters. Economists also expect public investment to have risen 1.4% q/q,
reversing from -1.7% for the first rise in seven quarters.
     Going forward, economists expects Japan's economy to return to a moderate
recovery path in Q2 based on a capital investment boost, but they voiced concern
over its downside risk amid uncertainties a strength of the Chinese economic
recovery.
     The average economist forecast for Q1 GDP growth is annualized at -0.06%,
according to the latest monthly ESP Survey of 36 economists by the Japan Center
for Economic Research conducted from March 26 to April 2.
--MNI Tokyo Bureau; tel: +81 90-2175-0040; email: hiroshi.inoue@marketnews.com
--MNI London Bureau; tel: +44 203-586-2225; email: les.commons@marketnews.com
[TOPICS: MAJDS$,M$A$$$,M$J$$$]
MNI London Bureau | +44 203-865-3812 | les.commons@marketnews.com

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