😎 Summer Sale Exclusive - Up to 50% off AI-powered stock picks by InvestingProCLAIM SALE

Japan's Q1 GDP fell less than first reported on revised capex

Published 06/09/2024, 08:03 PM
Updated 06/10/2024, 03:00 AM
© Reuters. FILE PHOTO: People enjoy drinks and food at an izakaya pub restaurant at the Ameyoko shopping district, in Tokyo, Japan February 15, 2024. REUTERS/Issei Kato/File Photo

By Satoshi Sugiyama and Tetsushi Kajimoto

TOKYO (Reuters) -Japan's economy contracted less than initially reported in January-March on upward revisions to capital spending and inventory data, lending modest support to the central bank's plans to raise interest rates again this year.

Analysts expect the Japanese economy to have bottomed out in the first three months of the year, although a stubbornly weak yen and disruptions at major automaker plants continue to cloud the outlook for the current quarter.

Still, "the revised GDP results made it easier for the Bank of Japan (BOJ) to feel encouraged about future rate hikes as it can assess capital investment is picking up even by a little bit," said Kohei Okazaki, senior economist at Nomura Securities.

Japan's GDP shrank a revised 1.8% annualised in the first quarter from the previous three months, Cabinet Office data showed on Monday, a smaller decline that economists' median forecast for a 1.9% contraction and a 2.0% decline in the preliminary estimate.

The revised figure translates into a quarter-on-quarter contraction of 0.5% in price-adjusted terms, unchanged from the initial reading issued last month.

RATE HIKES

The revised GDP data comes on speculation the BOJ may discuss cuts in its Japanese government bond (JGB) purchases at its policy review this week as part of efforts to unwind monetary stimulus to curb yen weakening.

Investors are looking for clues on the timing of further rate hikes by the central bank, which raised rates in March for the first time since 2007 in a landmark shift away from ultra-loose monetary policy.

"We can say capital spending picked up in the latter half of the fiscal year-end in March 2024...current capex conditions are a relief but we must be cautious about the outlook," Okazaki said.

"We can also maintain the view that consumption is on track for recovery due to hefty pay raise agreed at annual labour talks and income tax cuts that kicked in from June."

© Reuters. FILE PHOTO: People enjoy drinks and food at an izakaya pub restaurant at the Ameyoko shopping district, in Tokyo, Japan February 15, 2024. REUTERS/Issei Kato/File Photo

Private consumption, which accounts for more than half of the Japanese economy, fell 0.7% in the first quarter, unchanged from the preliminary estimate as rising living costs squeezed household finances. It was a fourth straight quarter of decline.

External demand, or exports minus imports, shaved 0.4 of a percentage point off overall GDP, while domestic demand knocked off 0.1 point, the data showed.

Latest comments

Risk Disclosure: Trading in financial instruments and/or cryptocurrencies involves high risks including the risk of losing some, or all, of your investment amount, and may not be suitable for all investors. Prices of cryptocurrencies are extremely volatile and may be affected by external factors such as financial, regulatory or political events. Trading on margin increases the financial risks.
Before deciding to trade in financial instrument or cryptocurrencies you should be fully informed of the risks and costs associated with trading the financial markets, carefully consider your investment objectives, level of experience, and risk appetite, and seek professional advice where needed.
Fusion Media would like to remind you that the data contained in this website is not necessarily real-time nor accurate. The data and prices on the website are not necessarily provided by any market or exchange, but may be provided by market makers, and so prices may not be accurate and may differ from the actual price at any given market, meaning prices are indicative and not appropriate for trading purposes. Fusion Media and any provider of the data contained in this website will not accept liability for any loss or damage as a result of your trading, or your reliance on the information contained within this website.
It is prohibited to use, store, reproduce, display, modify, transmit or distribute the data contained in this website without the explicit prior written permission of Fusion Media and/or the data provider. All intellectual property rights are reserved by the providers and/or the exchange providing the data contained in this website.
Fusion Media may be compensated by the advertisers that appear on the website, based on your interaction with the advertisements or advertisers.
© 2007-2024 - Fusion Media Limited. All Rights Reserved.