Japan: Q4 GDP disappoints

Japanese economy expands below expectations, while external uncertainties weigh on outlook.

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Japanese GDP rebounded by 0.3% quarter-on-quarter (q-o-q) in Q4 (1.4% annualised) after contracting by 0.7% q-o-q in Q3 (-2.6% annualised) due to a series of natural disasters over the summer. In year-over-year (y-o-y) terms, output remained virtually unchanged.

Domestic demand was the main driving force for the rebound in Q4, while external demand continued to be a drag.

A fairly strong domestic capex cycle is underway in Japan, likely due to the tight capacity constraints. However, if the deterioration in external demand gets much worse, this could derail this positive trend.

We have decided to downgrade our Japanese GDP growth forecast for 2019 to 0.8% from 1.0% previously due to softer momentum and the high level of uncertainty on the external front.

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