| Consensus | Consensus Range | Actual | Previous | Revised | |
|---|---|---|---|---|---|
| Quarter over Quarter | 0.2% | -0.4% to 0.4% | 0.4% | 0.0% | 0.0% |
| Annual Rate | 0.6% | -1.5% to 1.7% | 1.6% | 0.1% | -0.1% |
| Year over Year | 1.1% | 0.5% to 2.7% | 1.3% | 0.4% |
Highlights
Japan's gross domestic product for the January-March quarter posted a solid 0.4 percent rebound on quarter, or an annualized 1.6 percent rise, as an unexpected rebound in business investment added to overall growth led by consumer spending in the absence of strict Covid health rules, mitigating the drag from weak exports amid slowing global growth, Cabinet Office data released Wednesday showed.
The preliminary data came in stronger than the median economist forecast of 0.2 percent growth (forecasts ranged from a 0.4 percent drop to a 0.4 percent rise), or an annualized 0.6 percent gain (minus 1.5 percent to plus 1.7 percent).
The rebound in the first quarter GDP followed fractional contraction (revised down from fractional exapnsion) on the quarter, or an annualized 0.1 percent drop (revised from plus 0.1 percent), in the final quarter of 2022, when a large drop in private-sector inventories pushed down domestic demand. Eased Covid rules and travel subsidies supported consumption in October-December while net exports rose after a one-time surge in service imports caused an unexpected contraction in July-September.
Looking ahead, economic growth in April-June is expected to be led by solid consumer spending as the economy continues to reopen, but the outlook remains uncertain as Japan continues to face slower global demand and elevated costs, although wage hikes for fiscal 2023 ending March next year are estimated to be higher than in the previous year.
Japanese policymakers believe the economy needs continued monetary easing and fiscal spending to support gradual recovery and guide inflation to stable 2 percent.
The Econoday Consensus Divergence Index stands at minus 3, very near zero to indicate the Japanese economy is performing only marginally worse than expected. Excluding the impact of inflation, the index is at minus 7.
From a year earlier, the economy rose 1.3 percent in January-March (consensus was 1.1 percent), posting the eighth consecutive rise following a 0.4 percent rise in October-December.
The real annualized GDP amount rose to ¥548.97 trillion in the January-March quarter from a revised ¥546.81 trillion in October-December, surpassing the recent high of a revised ¥548.25 trillion hit in April-June 2022 (the economy grew 1.1 percent on quarter) and reaching the highest since ¥557.53 trillion seen in July-September 2019. Those figures are above a revised ¥544.45 trillion recorded in the January-March period of 2020, when the GDP grew 0.4 percent on quarter before the outbreak of the pandemic triggered an 8.0 percent slump in the following quarter.
In fiscal 2022, the real GDP rose 1.2 percent to ¥547.75 trillion, coming in below the official forecast of a 1.7 percent rise. It followed a 2.6 percent gain to ¥541.04 trillion in fiscal 2021. The latest figure is still lower than ¥550.14 trillion in the pre-pandemic fiscal 2019.
Consumption Resilient on Reopening Economy Despite High Cost of Living
Private consumption, which accounts for about 55 percent of GDP, rose 0.6 percent on quarter in the first quarter, coming in stronger than the median projection of a 0.3 percent increase on quarter (forecasts ranged from 0.1 percent to 0.7 percent gains) for a second straight clear increase following a revised 0.2 percent rise in the fourth quarter and no growth with a slightly positive bias (+0.0 percent) in the third quarter.
Consumption pushed up the GDP by 0.3 percentage point, weathering the impact of high costs for daily necessities, after making a positive 0.1 contribution to the total domestic output in the previous quarter.
Capex Rebounds, Beating Most Forecasts for 2nd Straight Drop
Business investment in equipment unexpectedly rebounded in January-March, up 0.9 percent on quarter, which was much stronger than the median forecast of a 0.4 percent drop (forecasts ranged from a 1.2 percent drop percent to a 1.0 percent rise), after falling a revised 0.7 percent in October-December and rising 1.5 percent in July-September. Capex raised the GDP by 0.2 percentage point in the first quarter after providing a negative 0.1-point contribution the previous quarter.
Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control. The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 starting on April 1 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
Net Exports Down Amid Slow Global Demand
Net exports of goods and services exports minus imports made a negative 0.3 percentage point contribution to total domestic output, coming in slightly weaker than the median forecast of a 0.2 percent drop (forecasts ranged from a 0.5-point drop to a 0.1-point gain).
In the previous quarter, the key measure of external demand raised the GDP by 0.4 point after trimming it by 0.6 point in July September.
Japanese exports posted their first drop in six quarters in the January-March GDP data while imports marked their second consecutive fall after a surge in July-September led by service payments.
The number of visitors from other countries has continued to pick up since the government eased its Covid border control rules in October, leading to higher spending by foreign visitors, which is counted among exports, but shipments of goods to other economies have been sluggish due to a global slowdown.
Private Inventories Slightly Positive, Public Works Spending Up
Private sector inventories provided a slightly positive 0.1-point contribution to the first quarter GDP, compared to the median forecast of a positive 0.1-point contribution (forecasts ranged from a 0.1-point drop to a 0.2-point rise) after pushing down the fourth quarter GDP by 0.5 percentage point.
Public works spending posted its fourth straight increase, up 2.4 percent on the quarter in January-March, which was bigger than the median forecast of a 1.6 percent rise (forecasts ranged from 0.8 percent to 3.6 percent gains), following a revised 0.2 percent rise in October-December. It was backed by the supplementary budget for fiscal 2022 that ended in March.
Public investment raised the first quarter total domestic output by 0.1 percentage point after making zero contribution (plus 0.0 point) to the GDP in each of the previous quarter.
The preliminary data came in stronger than the median economist forecast of 0.2 percent growth (forecasts ranged from a 0.4 percent drop to a 0.4 percent rise), or an annualized 0.6 percent gain (minus 1.5 percent to plus 1.7 percent).
The rebound in the first quarter GDP followed fractional contraction (revised down from fractional exapnsion) on the quarter, or an annualized 0.1 percent drop (revised from plus 0.1 percent), in the final quarter of 2022, when a large drop in private-sector inventories pushed down domestic demand. Eased Covid rules and travel subsidies supported consumption in October-December while net exports rose after a one-time surge in service imports caused an unexpected contraction in July-September.
Looking ahead, economic growth in April-June is expected to be led by solid consumer spending as the economy continues to reopen, but the outlook remains uncertain as Japan continues to face slower global demand and elevated costs, although wage hikes for fiscal 2023 ending March next year are estimated to be higher than in the previous year.
Japanese policymakers believe the economy needs continued monetary easing and fiscal spending to support gradual recovery and guide inflation to stable 2 percent.
The Econoday Consensus Divergence Index stands at minus 3, very near zero to indicate the Japanese economy is performing only marginally worse than expected. Excluding the impact of inflation, the index is at minus 7.
From a year earlier, the economy rose 1.3 percent in January-March (consensus was 1.1 percent), posting the eighth consecutive rise following a 0.4 percent rise in October-December.
The real annualized GDP amount rose to ¥548.97 trillion in the January-March quarter from a revised ¥546.81 trillion in October-December, surpassing the recent high of a revised ¥548.25 trillion hit in April-June 2022 (the economy grew 1.1 percent on quarter) and reaching the highest since ¥557.53 trillion seen in July-September 2019. Those figures are above a revised ¥544.45 trillion recorded in the January-March period of 2020, when the GDP grew 0.4 percent on quarter before the outbreak of the pandemic triggered an 8.0 percent slump in the following quarter.
In fiscal 2022, the real GDP rose 1.2 percent to ¥547.75 trillion, coming in below the official forecast of a 1.7 percent rise. It followed a 2.6 percent gain to ¥541.04 trillion in fiscal 2021. The latest figure is still lower than ¥550.14 trillion in the pre-pandemic fiscal 2019.
Consumption Resilient on Reopening Economy Despite High Cost of Living
Private consumption, which accounts for about 55 percent of GDP, rose 0.6 percent on quarter in the first quarter, coming in stronger than the median projection of a 0.3 percent increase on quarter (forecasts ranged from 0.1 percent to 0.7 percent gains) for a second straight clear increase following a revised 0.2 percent rise in the fourth quarter and no growth with a slightly positive bias (+0.0 percent) in the third quarter.
Consumption pushed up the GDP by 0.3 percentage point, weathering the impact of high costs for daily necessities, after making a positive 0.1 contribution to the total domestic output in the previous quarter.
Capex Rebounds, Beating Most Forecasts for 2nd Straight Drop
Business investment in equipment unexpectedly rebounded in January-March, up 0.9 percent on quarter, which was much stronger than the median forecast of a 0.4 percent drop (forecasts ranged from a 1.2 percent drop percent to a 1.0 percent rise), after falling a revised 0.7 percent in October-December and rising 1.5 percent in July-September. Capex raised the GDP by 0.2 percentage point in the first quarter after providing a negative 0.1-point contribution the previous quarter.
Capital investment is generally supported by demand for automation amid labor shortages in some sectors as well as government-led digital transformation and emission control. The Bank of Japan's quarterly Tankan business survey for March released last week showed large firms have solid plans for investment in equipment for fiscal 2023 starting on April 1 while smaller firms projected a rise at the initial stage, which is unusually bullish. Some plans may be carried over from fiscal 2022.
Net Exports Down Amid Slow Global Demand
Net exports of goods and services exports minus imports made a negative 0.3 percentage point contribution to total domestic output, coming in slightly weaker than the median forecast of a 0.2 percent drop (forecasts ranged from a 0.5-point drop to a 0.1-point gain).
In the previous quarter, the key measure of external demand raised the GDP by 0.4 point after trimming it by 0.6 point in July September.
Japanese exports posted their first drop in six quarters in the January-March GDP data while imports marked their second consecutive fall after a surge in July-September led by service payments.
The number of visitors from other countries has continued to pick up since the government eased its Covid border control rules in October, leading to higher spending by foreign visitors, which is counted among exports, but shipments of goods to other economies have been sluggish due to a global slowdown.
Private Inventories Slightly Positive, Public Works Spending Up
Private sector inventories provided a slightly positive 0.1-point contribution to the first quarter GDP, compared to the median forecast of a positive 0.1-point contribution (forecasts ranged from a 0.1-point drop to a 0.2-point rise) after pushing down the fourth quarter GDP by 0.5 percentage point.
Public works spending posted its fourth straight increase, up 2.4 percent on the quarter in January-March, which was bigger than the median forecast of a 1.6 percent rise (forecasts ranged from 0.8 percent to 3.6 percent gains), following a revised 0.2 percent rise in October-December. It was backed by the supplementary budget for fiscal 2022 that ended in March.
Public investment raised the first quarter total domestic output by 0.1 percentage point after making zero contribution (plus 0.0 point) to the GDP in each of the previous quarter.
Market Consensus Before Announcement
Japan's gross domestic product for the January-March quarter is forecast to post a modest 0.2 percent rebound on quarter, or an annualized 0.6 percent rise, as exports and business investment lost some steam amid slowing global growth while widely eased Covid public health rules mitigated the impact of elevated costs for daily necessities on consumer spending.
The expected slight rebound in the Q1 GDP would follow zero growth on quarter, or an annualized 0.1 percent increase, in the final quarter of 2022, when a large drop in private-sector inventories pushed down domestic demand. Eased Covid rules and travel subsidies supported consumption in October-December while net exports rose after a one-time surge in service imports caused an unexpected contraction in July-September.
The expected slight rebound in the Q1 GDP would follow zero growth on quarter, or an annualized 0.1 percent increase, in the final quarter of 2022, when a large drop in private-sector inventories pushed down domestic demand. Eased Covid rules and travel subsidies supported consumption in October-December while net exports rose after a one-time surge in service imports caused an unexpected contraction in July-September.
Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
Description
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.
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.
