Japanese economy posts steepest quarterly contraction since 2009; economy shrinks 1.7% in Q2

Print Options

Japanese Economic Update – 15 August 2014

Japanese economy posts steepest quarterly contraction since 2009; economy shrinks 1.7% in Q2

In line with official projections; the Japanese economy posted its steepest quarterly contraction since 2009 in Q2 of this year when output shrank by 1.7% QoQ (6.8% YoY). In addition to the sharp contraction during Q2, growth figures for the first quarter of this year were also revised downwards.

The sudden deceleration in economic momentum is widely believed to be the result of the sales tax increase from 5% to 8% in April of this year, which followed a period of increased activity as consumers and businesses brought forward large ticket purchases in order to avoid paying increased tax.

Given the severity of the contraction, it will be interesting to see whether Japanese policy makers are willing to reconsider the merits of their optimistic assessment of the economy at the next monetary policy meeting.

Our view remains that low exports, weaker business investment and a recovering yen will ultimately force the BOJ into a further round of easing later this year in order for it to safeguard the recovery.

NIKKEI 225 10 Minute Intervals

.

IMPORTANT:
The contents of this report and the Stockatonia website (https://www.stockatonia.co.uk/) have been prepared to provide general information only, and as such, the specific needs, investment objectives or financial situation of any particular user have not been taken into consideration. Please always remember that the value of investments may fall as well as rise. Investing in securities, and any other products associated with them, carries a high degree of risk and may not be suitable for all investors. For advice or guidance related to investing in securities markets, please consult with your own financial adviser.