Japan: Real GDP growth for 2016 Q4 likely to be revised up to 1.8% q-q - Nomura

Analysts at Nomura expect that Japanese real GDP growth for 2016 Q4 will be revised up to 1.8% q-q annualized at the second preliminary estimate stage (versus 1.0% at the first preliminary estimate stage) which is due to be released on 8 March (Wednesday).

Key Quotes

“We see major contribution from upward revision for capex

• According to the Financial Statements Statistics of Corporations by Industry for 2016 Q4 released on 1 March, capex (nominal basis, ex software and financials & insurance, seasonally adjusted) rose 3.5% q-q in Q4, the first rise in three quarters. Capex rose 7.4% in the manufacturing sector and 1.3% in the nonmanufacturing sector. Recurring profits also rose 17.0% in the manufacturing sector and 0.1% in the nonmanufacturing sector. This shows markedly strong growth in both capex and recurring profits in the manufacturing sector. We attribute this to the boost to profits from yen depreciation versus the dollar since the US presidential election in November 2016 as well as the recovery in the global economy running since summer 2016. With capex in the Financial Statements Statistics of Corporations by Industry also showing strong growth, we forecast an upward revision to GDP-basis capex in the second set of preliminary estimates to +2.1% y-y (versus +0.9% in the first set of preliminary estimates). 
• Inventory investment dented real GDP growth (q-q) by 0.1ppt in the first preliminary estimates. We expect upward revisions to inventories of works in progress and raw materials in the second preliminary estimates, primarily based on the Financial Statements Statistics of Corporations by Industry announced on 1 March, but think this will have almost no impact on overall inventories. 
• Among other demand-side items, we forecast a downward revision for public investment, reflecting fundamental statistics published since the first preliminary estimates. We also look to a downward revision for housing investment owing to a slowdown in growth in December Integrated Statistics on Construction Works. Overall, we think the second set of preliminary estimates will be consistent with an export-led economic recovery, as was the case with the first preliminary estimates.”