Japan: The economic recovery is ongoing
13 JUNE 2012
In the first quarter, real GDP growth was 4.7% at an annualised rate: above the marketforecast and above our own May forecast in
as well. Consequently, we
are raising our 2012 Japan GDP forecast to 2.4%
(from 2.2%) despite the fact thatour 2012 forecast for the Chinese economy has been lowered to 8.1% (was 8.5%). In2013, the Japanese economy will grow 1.7%. Our forecast is well above the consensus(Chart 1).
Personal consumption was strong in the first quarter
and contributed 2.6percentage points to GDP growth. The government’s subsidies for low-energy cars haveboosted consumption and will likely continue to do so until the subsidies dry up in thesecond half of 2012. Household confidence indicators have advanced as well (Chart 2).
Restructuring following the 2011 disaster is clearly boosting the economy
; public-sector fixed investment increased strongly in the first quarter. Exports rebounded as well,and external demand clearly holds one of the keys to the outlook. Between late-Marchand the end of May, the yen was trading stronger against both the euro and the dollar(Chart 3) which is related to the sell-off in the stock market (Chart 4).
Weaker growth overseas and developments in Europe suggest that
exports will slowdown in the current and subsequent quarters
. To be sure, machinery orders fromoverseas has shown weakness but recovered slightly in April (Chart 5) and purchasingmanagers’ indices are still holding up relatively well (Chart 6). Although our exportforecast is revised lower compared to the May issue of
, the risks are tiltedto the downside.
For the first time in 31 years, Japan posted
a trade deficit last year
. What the monthlynumbers are suggesting is that there will also be a deficit in 2012. This raises questionsabout the prevailing economic structure, with large current account surpluses and netsavings. If the current account surplus also turns into deficit, the consequences may bedramatic since Japan would be forced to import capital from abroad to finance itsgargantuan debt load (Chart 7).
Inflation will be positive in 2012, while unemployment should drift lower (Charts 8 and 9).
SEB Economic Research+46 8 763 85 06
2010 2011 2012 2013
GDP* 4.4 -0.7 2.4 1.7Unemployment
5.1 4.6 4.3 4.0Inflation* -0.7 -0.3 0.1 0.2Government deficit*** -9.3 -10.3 -11.0 -11.0
*Percentage change, ** Per cent of labour force, *** Per cent of GDPSource: SEB