By Max Sato
(MaceNews) – Japan’s gross domestic product is forecast to be nearly flat, up just 0.1% on quarter, or an annualized 0.4%, in the April-June quarter, at the peak of the fear that the protectionist U.S. trade policy could plunge the global economy into a tailspin. The forecasts range from a 0.1% drop to a 0.4% gain on quarter (-0.5% to +1.5% annualized) in a Mace News survey of 10 economists.
The Cabinet Office will release the preliminary Q2 GDP data at 0850 JST on Friday, Aug. 15 (2350 GMT/1950 EDT Thursday, Aug. 14).
Stiff Trump tariffs on autos and steel/aluminum forced Japanese carmakers to slash the prices for their U.S. customers to protect their market share, triggering concerns that this practice, if prolonged, would hurt exporter profits and thus the domestic stock market at a time when 3% inflation caused by protracted rice supply shortages has dented consumer spending.
Supporting modest GDP growth is continued solid business investment in equipment and software, reflecting high corporate earnings and the need to streamline operations amid widespread labor shortages. Dampening total output is housing investment, which saw a pullback from January-March when there was rush construction before stricter building codes for energy efficiency took effect on April 1.
Sluggish Q2 growth would follow the economy’s first contraction in four quarters in January-March with a slight 0.04% dip (officially -0.0%), or an annualized -0.2%, which was in payback for a technical jump in net exports in the previous quarter. It was also due to flat private consumption amid high costs of living and the uncertainty over global growth and inflation.
Domestic demand is expected to provide a positive 0.1 percentage point contribution to total domestic output in Q2 after boosting Q1 GDP by 0.8 point. External demand (exports minus imports) is also estimated to have raised the Q2 GDP by 0.1 point after pushing down the total output by 0.8 point the previous quarter.
Looking ahead, Japan’s economic performance in the July-September quarter is expected to remain sluggish as consumers stay frugal about spending amid falling real wages while external demand is marred by trade rows and some firms are wary of implementing their solid capex plans. The negative impact of Trump tariffs will be emerging more in this quarter while there is some optimism that the tariff rates may not be raised further in light of bilateral agreements with key U.S. trading partners.
Consensus forecasts for key components in percentage change on quarter except for private inventories and net exports, whose contributions are in percentage points. Figures in the previous quarter are in parentheses: