(Bloomberg) -- Business spending drove a strong rebound in Japan’s economy in the second quarter after a contraction at the start of the year. Private consumption also picked up.
Key Takeaways
The solid rebound from a first-quarter contraction will help the Bank of Japan, which last month tweaked its monetary stimulus program to make it more sustainable. Strong corporate profits are driving business investment and wage gains. Further growth that exceeds the economy’s potential rate would help push inflation closer to the central bank’s 2 percent target, while reassuring policy makers who are nervous about a sales-tax increase slated for October 2019. Prime Minister Shinzo Abe is expected to decide whether to go ahead with the increase this autumn.
Economist Views
- "The animal spirits of corporations are coming back. We’re seeing a record amount of M&A activity, which does tell you that corporate CEOs are actually engaging," Jesper Koll, chief executive officer of Wisdomtree Japan Inc., said on Bloomberg TV. "Now we’ve got positive business expenditure data. That suggests investing for growth, investing in better technology," he said. "Finally that’s starting to happen."
- Marcel Thieliant of Capital Economics said that despite today’s figure, growth won’t be as vigorous this year as in 2017. "The 0.1 percentage point drag from net trade was disappointing," he said in a note. "And given that real compensation of employees soared by 3.8 percent y/y, the 0.2 percent y/y rise in private consumption was woefully weak."
Other Details
- Measured quarter on quarter, GDP grew 0.5 percent (forecast +0.3 percent).
- The reading for annualized GDP in the first quarter was revised down to -0.9 percent from -0.6 percent.
- Nominal GDP rose 0.4 percent in second quarter (forecast +0.2 percent)
- Net exports, or shipments minus imports, subtracted 0.1 percentage point from GDP growth.
- Private inventories made no contribution to GDP in the quarter.
(Adds economist comments, details.)
