The data is here from earlier, shockingly bad compared with expectations:
- GDP -0.4% q/q vs. +1.4% expected
- Analysis via ING:
Japan’s 4Q23 GDP unexpectedly declined by 0.1% QoQ (vs -0.7% 3Q23, 0.2% market consensus). - Weak domestic demand dragged down overall growth. Private consumption and business spending all contracted for a second quarter (-0.2% and -0.1%, respectively). Net exports contributed 0.2 pp to the QoQ growth total.
- Monthly activity data suggested weak consumption and investment in 4Q23, but the GDP outcome was softer than expected. Japan’s economy has now slipped into a technical recession.
And they go on with what it means for the Bank of Japan:
- Yesterday, we wrote that if GDP came out weaker than expected, it would complicate the BoJ’s rate hike options, especially with the JPY hovering around the psychological 150 level. The market’s expectations for a March/April rate hike will likely die down. We maintain our BoJ call for a June rate hike but with the growing possibility of delaying this to 3Q24.
- Exports show a continued recovery on the back of solid demand in semiconductors and vehicles while survey outcomes signal an optimistic outlook for the current quarter. Inflation is also slowly easing, which, combined with another year of solid wage growth means that private consumption is likely to rebound. If so, we continue to believe that the BoJ will deliver its first rate hike in June.
I wonder if Ueda is thinking "Recession, leads to rate hikes ... doesn't compute?"
