Japan: an export-led recovery is underway

Fourth straight quarter of growth poses upside risk to our Japanese GDP forecast.



The first preliminary reading of Japan’s real GDP growth for Q4 2016 came in at 1% q-o-q annualised, roughly in line with the consensus forecast of 1.1% but below the 1.3% growth in Q3. The growth in Q4 almost all came from external demand (+1.0%), while the contribution from domestic demand was virtually 0%. Japanese exports have shown clear signs of improvement in recent months, consistent with the export recovery in broad Asia since H2 2016.

The stronger performance of Japan’s export/manufacturing sector in recent months poses upside risk to our Japanese GDP forecast for 2017, which currently stands at 0.8%. As the Q4 GDP figures indicate, exports and domestic production give clear signs of recovery, and the gradual reacceleration in the Japanese economy is likely to persist at least through H1 2017.

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