Takashi Miwa, Research Analyst at Nomura, notes that the Japan’s first preliminary 2018 Q2 GDP estimates released on 10 August show real GDP up 1.9% q-q annualized, stronger than both the median Bloomberg consensus forecast and our forecast of 1.4% growth.

Key Quotes

“This also marks a swing back to positive q-q growth after the fall into negative growth in Q1 (-0.9% q-q annualized).”

“The main factors behind the above-consensus growth were stronger-than-expected growth in both real consumer spending and real capex. Real consumer spending was up 0.7% q-q compared with the median Bloomberg consensus forecast for 0.2% growth, while real capex was up 1.3% versus the consensus forecast for 0.6% growth.”

“Growth in real exports, however, came to just +0.2% q-q in 2018 Q2, in what marks a gradual slowdown from +0.6% in Q1 after a peak of +2.1% in 2017 Q4. We believe this reflects a slowdown in the global economy and believe that external demand has also started to gradually slow in Japan.”

“While real GDP growth in Q2 was both strong and higher than the consensus forecast, we believe it is reasonable to conclude that growth momentum for the Japanese economy as a whole is gradually starting to slow.”