Japan's Nikkei 225 (JAP225) index gained almost 1.00% in the first part of the day today to around 39,000 points following the publication of Q1 2024 GDP. The data was revised to the upside, indicating lower contraction than expected by the market. Despite this, the JAP225 index reduced initial gains and is currently trading only 0.45% higher.
Japan's economy contracted at an annualized rate of 1.8% in the first quarter of 2024, a slight improvement from the initial estimate of a 2.0% decline. The quarter-on-quarter GDP fell by 0.5%, consistent with previous reports. Despite the contraction, nominal GDP remained unchanged, although the forecast was a 0.1% increase.
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Create account Try a demo Download mobile app Download mobile appKey components of the GDP report included:
- Private consumption: unchanged at a 0.7% decline quarter-on-quarter.
- Business spending: revised to a 0.4% drop from an initial estimate of 0.8%.
- Inventory contribution: +0.3% to GDP, slightly above the 0.2% estimate.
- Net exports contribution: -0.4% to GDP, worse than the -0.3% estimate.
- GDP deflator: +3.4% year-on-year, below the estimated 3.6%.
The decline was influenced by weak domestic demand as well as the slowdown in the global economy. Additionally, the slight upward revision in capital investment indicates slightly better business confidence than initially reported. Despite this, the overall economic outlook remains weak, with ongoing concerns about consumer spending and inflation.
The Nikkei 225 responded positively to the revised GDP data, rising 0.92% on Monday. The current market consensus is for a potential interest rate hike by the Bank of Japan in September 2024. However, despite slightly better data, the GDP report did not significantly affect investors' expectations. The key data in this aspect may be the upcoming CPI and wage growth data. The next inflation report is scheduled on the 20th of June.
Source: xStation 5
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