Japan Q2 GDP growth seen slowing on weak demand

Japan’s economic growth was expected to slow in the second quarter, weighed down by weak domestic demand and stagnant exports, a Reuters poll found yesterday.
Weak economic growth would be a setback for Prime Minister Shinzo Abe who said this week that the top priority for his reshuffled cabinet was growing the economy and beating deflation.
Gross domestic product (GDP) was expected to expand at an annualised rate of 0.7% in April-June, the poll of 21 analysts showed, following 1.9% annualised growth in the first quarter.
This would be a quarterly expansion of 0.2% after a 0.5% rise in January-March.
“Domestic demand and exports remained weak while the boost from the Leap Year has faded so the growth rate was probably slow,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“The impact of a strong yen on exports may be seen soon.
We expect they will probably stay weak this year.”
Private consumption, which accounts for roughly 60% of GDP, was seen rising only 0.2% in the second quarter, from a 0.6% gain in the previous quarter.
Capital spending was expected to slip 0.1% after a 0.7% decline, the poll found.
The Cabinet Office will issue the GDP data on August 15 at 8:50 am.
Abe’s cabinet announced a stimulus package this week with headline spending of ¥28tn ($278bn) to be implemented over several years.
The government estimates the stimulus will drive up growth by around 1.3% in the near term.
On Wednesday the Cabinet Office publishes June core machinery orders, a leading indicator of capital spending, which were seen as likely to rise for the first time in three months.
The highly volatile machinery orders data, a series regarded as a good leading indicator of capital spending, were seen likely to grow 3.1% in June after a 1.4% decline in May.
From a year earlier, core orders, which exclude those of ships and electrical equipment, probably declined 4.2% in June after a 11.7% fall in May.
“Firms’ capital spending plans are not so bad.
But the surrounding environment such as a strong yen and weak demand is not favourable,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“Downside risks to capital spending are increasing.”
The finance ministry will publish the June current account balance on Monday, which is expected to show a surplus of ¥1.0567tn ($10.45bn).
It would be 24th straight monthly surplus but the strong yen is expected to reduce the exchange value of overseas income.
The Bank of Japan’s corporate goods price index (CGPI), which measures the price companies charge each other for goods and services, was expected to fall 4% in the year to July.