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• In the first quarter, real GDP growth was 4.7% at an annualised rate: above the market forecast and above our own May forecast in Nordic Outlook as well. Consequently, we are raising our 2012 Japan GDP forecast to 2.4% (from 2.2%) despite the fact that our 2012 forecast for the Chinese economy has been lowered to 8.1% (was 8.5%). In 2013, 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 2.6 percentage points to GDP growth. The government’s subsidies for low-energy cars have boosted consumption and will likely continue to do so until the subsidies dry up in the second half of 2012. Household confidence indicators have advanced as well (Chart 2). • Restructuring following the 2011 disaster is clearly boosting the economy; publicsector 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-March and 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 slow down in the current and subsequent quarters. To be sure, machinery orders from overseas has shown weakness but recovered slightly in April (Chart 5) and purchasing managers’ indices are still holding up relatively well (Chart 6). Although our export forecast is revised lower compared to the May issue of Nordic Outlook, the risks are tilted to the downside. • For the first time in 31 years, Japan posted a trade deficit last year. What the monthly numbers are suggesting is that there will also be a deficit in 2012. This raises questions about the prevailing economic structure, with large current account surpluses and net savings. If the current account surplus also turns into deficit, the consequences may be dramatic since Japan would be forced to import capital from abroad to finance its gargantuan debt load (Chart 7). • Inflation will be positive in 2012, while unemployment should drift lower (Charts 8 and 9).
WEDNESDAY 13 JUNE 2012 Mattias Bruér SEB Economic Research +46 8 763 85 06
2010 2011 2012 2013 GDP* Unemployment** Inflation* Government deficit***
4.4 5.1 -0.7
-0.7 4.6 -0.3
2.4 4.3 0.1 -11.0
1.7 4.0 0.2 -11.0
*Percentage change, ** Per cent of labour force, *** Per cent of GDP
CHARTS ON THE JAPANESE ECONOMY