Wed Mar 07 17:50:00 CST 2018

Consensus Actual Previous
Quarter over Quarter 0.2% 0.4% 0.1%
Q/Q change - SAAR 0.8% 1.6% 0.5%
Year over Year 2.0% 1.5%

Revised estimates show Japan's gross domestic product grew by 0.4 percent on the quarter in the three months to December. This is above the preliminary estimate of 0.1 percent, published last month, and also exceeds the consensus forecast of 0.2 percent.  In annualised terms, GDP grew 1.6 percent in the three months to December, compared with the preliminary estimate of 0.5 percent and the consensus forecast of 0.8 percent. In the three months to September, Japan's GDP grew 0.1 percent on the quarter (0.5 percent in annualised terms).

In year-on-year original terms, Japan's GDP grew 2.0 percent in the three months to December, up from the preliminary estimate of 1.5 percent. This is just below the 2.1 percent year-on-year growth recorded in the three months to September.

The upward revision to the headline growth estimate reflects stronger private non-residential investment, which is now estimated to have grown by 1.0 percent, up from the initial estimate of 0.7 percent, with the contribution to growth revised up from 0.1 to 0.3 percentage points. The contribution to growth from the change in private inventories was also revised up from minus 0.1 to 0.1 percentage points, while public demand is now estimated to have made zero contribution after previously estimated to have made a small negative contribution. The contribution of other expenditure components was largely unchanged, with the revised estimates continuing to show that household consumption grew by 0.5 percent on the quarter.

Relative to the three months to September, today's report confirm that headline GDP growth was slightly weaker in the three months to December, mainly driven by a pick up in imports growth resulting in a zero contribution from net exports after a positive contribution of 0.5 percentage points previously. private-sector investment growth also weakened relative to the previous quarter. This was partly offset by stronger private consumption and public spending.

Today's report confirms that Japan's current economic expansion has now extended to eight consecutive quarters, its longest uninterrupted period of positive growth since 1989. The report - and particularly the confirmed rebound in consumption growth - will also likely reassure officials at the Bank of Japan that their assessment that the Japanese economy will "expand moderately" in coming quarters remains valid. The BoJ's median forecast for real GDP growth is 1.9 percent for the current fiscal year starting April 2017, 1.4 percent for the fiscal year starting April 2018, and 0.7 percent for the fiscal year starting April 2019.

Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.

Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.

The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.