Monday, December 8, 2014

Japan economy to return to growth path from 4Q14 – DBS

The DBS Team believes that Japan’s economy will return to growth part from 4Q14 onwards, in spite of downward revision of 3Q GDP, anticipating domestic demand to lead the recovery.

Key Quotes

“The final GDP results showed that the economy shrank 1.9% (QoQ saar) in 3Q, even worse than the initial estimate of 1.6%. On the other hand, the BOP data were better than expected. The current account posted a surplus of JPY 947bn (sa) in Oct, far bigger than the monthly average of JPY 215bn in 3Q.��

“Reflecting the downward revision of 3Q GDP, we have further cut the 2014 growth estimate to 0.3% from 0.5%. The 2015 growth forecast is maintained at 1.3%, however. The view remains unchanged that the economy will return to the growth path from 4Q14 onwards. Domestic demand is expected to lead the recovery, thanks to fading impact of the first sales tax hike, the delay of the second tax hike, the rise in equity prices and the fall in long-term interest rates.”

“The short-term outlook for the current account balance has also improved, taking into account the sharp declines in energy import prices and the recovery in electronics exports. We now project the current account surplus to widen to JPY 5trn (1% of GDP) in 2015 from JPY 2.5trn (0.5% of GDP) this year.”