Japan’s Q1 GDP revised upwards on support from leap year gains

Japan’s first quarter gross domestic product has been revised upwards than initially estimated as capital spending improved on support provided by an extra day of work in this year. However, worries still echo over a slow pace of consumer spending and weak exports.

Japan Q1 final GDP revised to 1.9 percent from 1.7 percent annualized. GDP rose 0.5 percent q/q, as expected, from 0.4 percent previously (non-annualized). Nominal GDP rose 0.6 percent q/q, in line with market expectations, from 0.5 percent in the last quarter. GDP deflator went up by 0.9 percent, again as expected.

Meanwhile, private consumption came unrevised at 0.9 percent and business spending revised down to -0.7 percent from -1.4 percent (consensus was to be revised to -0.4 percent). Consumption contributed 0.4 pp compared to 0.3 pp in the previous quarter. Public investment stood unchanged at 0.0 pp, whereas capex fell 0.1 pp vs -0.2 pp. Also, inventories fell 0.1 pp compared to 0.0 pp last quarter.

Comments from Prime Minister Shinzo Abe confirmed that the government will undertake additional economic measures soon but economists remain concerned that a sluggish approach to policy would mean lesser money allocated to reversing demographic dividend and speeding up growth.

"The upward revision is very slight, and when you exclude the impact of leap year growth is not that strong," said Shuji Tonouchi, Senior Fixed Income Strategist, Mitsubishi UFJ Morgan Stanley Securities.

Meanwhile, further gains in the yen could lower export profits and discourage companies from increasing investment and wages.