Usually, a nation makes an initial prediction about its GDP performance over a quarter based on a partial set of data which is then corrected twice against a more comprehensive data set and then finally against all data – usually, the initial estimate proves to be close to the final figure, but not always.
Japan has just demonstrated that initial data can be off. The initial reading on Japan’s Q3 GDP was that it came in at a relatively strong figure of 2.2%, however, revised data suggests that the world’s third largest economy grew at a much more subdued pace of 1.3%; quite a significant downwards revision. The data compares growth against the same quarter in 2015.
The explanation for the weaker reading is that business investment in the initial data set was overestimated. Capital investment in Q3 fell by 0.4% compared to a year earlier as real estate businesses and steel manufacturers cut back on their investments. On the positive side of the balance sheet, consumer spending was stronger than initially thought and sentiment in the service sector was more buoyant.
It was estimated that exports were responsible for approximately a quarter of the growth seen. The Yen has been weakening since the election of Donald Trump to the US presidency (falling from 104 Yen to the Dollar at the start of November to stand at 114.5 currently) which should help exports going forward. If, as many analysts expect, the Federal Reserve raises interest rates during its December meeting, it is likely that the Dollar will appreciate against other major currencies which would further cheapen Japanese imports to the US, one of its major markets.