Japanese Economic Update – 08 September 2014

Japanese economic growth revised lower for the second quarter, BOJ provides gloomy update on economy; holds out hope for remainder of the year

The Japanese economy recoiled harder during Q2 than earlier figures had suggested, according to figures released this morning.

In detail, the economy contracted by -1.8% on a QoQ basis and -7.1% on a YoY basis; representing the steepest decline in economic activity since the earthquake and Fukushima disaster in 2011

The same data as referenced above also highlighted that exports, industrial production and capex were all lower than in previous periods during the second and third quarters, however the BOJ holds out hope that these will recover later in the year.

All in all, the Japanese economic recovery remains tentative in the aftermath of the April sales tax increase. With domestic demand weak and wages still a concern, all in the face of artificially high inflation, we reiterate our view that the BOJ is likely to ease further during the months ahead.

Although the exact timing is difficult to predict, we believe that the risk of policy maker action will increase as we head toward the close of the year.

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