Japan: Moderate growth thanks to private domestic demand

5 min

The Japanese economy continued its upward trend in the final quarter of 2017, albeit at a more moderate pace. As a result, economic activity rose on a sequential basis in the eighth consecutive quarter, the longest unbroken string in 28 years. According to the first preliminary estimate, real GDP increased by +0.1% q/q (+1.5% y/y). As expected, the further expansion was driven by private final domestic demand, while public demand declined again. Private consumption clearly recovered (+0.5% q/q) after weakness in Q3 and the moderate upward trend in business fixed investment (+0.7% q/q) continued. The slowdown in inventory investment should not be alarming but rather seen as payback following the sharp build-up in Q3. On a quarterly comparison, net exports did not contribute to growth, as the persistently strong increase in exports (+2.4% q/q) was offset by a sharp rebound in import growth (+2.9% q/q). In 2017 as a whole, real GDP expanded by +1.6%, with exports being the key driving force (+6.8%). The economy should maintain above-potential growth of +1.2% in 2018.