Japan Q4 GDP is released on Monday (23:50 GMT Sunday)
Economists surveyed by The Wall Street Journal expect that the world’s third-largest economy expanded an annualized 2.8% from the previous quarter
3 Keys:
1. Domestic Demand
- Growth in Q4 was likely all about demand at home
- Economists say consumers, likely spent 0.7% more than the previous quarter on cars and eating out
- Companies probably spent 2.2% more on equipment and factories
- Retailers ascribed a lot of the spending to consumers buying ahead of the April sales tax hike, and consumption may decline somewhat in coming quarters
- “We can expect growth centered on a speeding up of domestic demand,” said Daiwa Institute of Research Institute economist Shotaro Kugo.
2. Overseas Demand
- Economists are looking for a modest 0.9% uptick in exports (vs. a 0.6% drop in the preceding quarter)
- They say the recovery in exports won’t have a visible impact on GDP because strong domestic demand has caused a surge in imports, therefore that is partly offsetting the positive effect of the export rise
3. Capital Spending
- Business investment is expected to see a solid 2.2% gain, the fastest increase in two years
- Again, spending ahead of the April sales-tax rise
- The increase also reflects demand such as for construction equipment by businesses undertaking public-works projects for the government
“It’s likely that companies will have started to do investments they held back on as the improvement in company earnings continues and their sense of the overall economy improves,” said Mitsubishi UFJ Research & Consulting economist Shinichiro Kobayashi.
Recent machinery orders data–a leading indicator of capital investment–spells uncertainty for the outlook on business spending, as companies are expected to cautiously evaluate the trajectory of private consumption after the April tax increase.
