Japan's economy likely expanded at a better pace than initially reported, economists predict ahead of revised data due for release on Thursday. Second quarter growth is expected to be revised to +0.7% q/q from the preliminary +0.5%, or an annualized +2.9%, compared to +2.2%.
Capital investment is likely to be revised to +2.0% on quarter from the initial reading of +1.4%. Net exports of goods and services -- exports minus imports -- are seen adding a small positive contribution to the total domestic output, largely in line with initial estimates.
Going forward, economists expected Japan's economic growth to slow in Q3 as surges of Covid-19 cases restrict economic activity and as high living costs impede private consumption. But exports and industrial production are expected to recover somewhat as supply-side constrains is easing, supporting the economy.
BOJ EYE RISKS
The Bank of Japan still sees downside risks for domestic manufacturers, despite an upbeat outlook from the government in recent days, MNI understands.
Officials at the bank still see industrial production picking up in Q3, although the question the pace of growth, as semi-conductor shortages and supply chain disruption are still a concern, despite some production recovery in parts of China. Officials at the bank still see industrial production picking up in Q3, although the question the pace of growth, as semi-conductor shortages and supply chain disruption are still a concern, despite some post-covid production recovery in parts of China.
The latest output data, published Wednesday (link), was better than economists had expected and led to the government’s upbeat assessment, but bank officials have reservations about assumptions in the METI outlook
The global central bank tightening cycle is also seen as a growing risk, as it will likely weigh further on consumers, hitting Japan’s exporters.
Not all is gloomy in the immediate outlook, as the ongoing recovery from the pandemic offers residual support for the economy, particularly in the hospitality sector as bars, restaurants and hotels recover.
Even there though, there are clouds gathering, as BOJ economists expect consumers to retrench as the cost-of-living crisis bites hard.