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Weakening Japanese momentum behind strong GDP figures

Summary:
Japan’s latest GDP report reveals some notable weakness in the economy despite the strong headline figures.The preliminary reading of Japanese GDP for Q1 shows that the economy grew by 2.1% q-o-q annualised, beating the consensus forecast of -0.2%.However, behind the strong headline figures, details of the GDP report reveal some broad-based weakening in momentum.Declining corporate capex and sluggish household consumption both drag on domestic demand.The seemingly strong net exports in Q1 were the result of a sharp decline in imports, which is unsustainable and points to further downside in exports ahead.The upcoming consumption tax hike will add more headwinds to growth in Q4.At this point, our 2019 Japanese GDP forecast remains at 0.8%. Given the elevated trade tensions between the US

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Japan’s latest GDP report reveals some notable weakness in the economy despite the strong headline figures.

The preliminary reading of Japanese GDP for Q1 shows that the economy grew by 2.1% q-o-q annualised, beating the consensus forecast of -0.2%.

However, behind the strong headline figures, details of the GDP report reveal some broad-based weakening in momentum.

Declining corporate capex and sluggish household consumption both drag on domestic demand.

The seemingly strong net exports in Q1 were the result of a sharp decline in imports, which is unsustainable and points to further downside in exports ahead.

The upcoming consumption tax hike will add more headwinds to growth in Q4.

At this point, our 2019 Japanese GDP forecast remains at 0.8%. Given the elevated trade tensions between the US and China, the risks are clearly tilted to the downside.

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About Dong Chen
Dong Chen
Dong Chen is senior Asia economist, Pictet Wealth Management. - Twelve years of working experience in macroeconomic research - Extensive knowledge about asset allocation and multi-asset class portfolios - Rich client-facing experiences with high-net-worth clients across Asia - Rigorous training in economics and comprehensive knowledge about Asian economies and business - Strong analytical skills and solid background in statistical/econometric analysis - Strong communication / presentation skills - Native Mandarin Chinese speaker and fluent in English Do not hesitate to contact Pictet for an investment proposal. Please contact Zurich Office, the Geneva Office or one of 26 other offices world-wide.

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