Tokyo shares surge on Wall Street rally, strong GDJapanese GDP Surprises With 0.9% Q/Q Rise in Q4
09:38 02/14 (CEP News) Montreal – Surprising to the upside on Wednesday, preliminary GDP in Japan rose 0.9% quarter-over-quarter at the end of 2007, topping forecasts for a 0.4% rise, and beyond the downwardly revised 0.3% rise in Q3.
Prior to revisions, Q3 GDP had been estimated at +0.4%. Annual GDP rose 3.7% in Q4, also above forecasts for a 1.7% increase. The third quarter's prior figure was revised down to +1.3% from +1.5%.
"GDP growth was surprisingly strong in Q4 07, underlining our view that the market had probably turned too negative on Japanese growth," wrote Danksebank economist Flemming J. Nielsen. "That said, we believe growth will slow significantly in H2 ‘08 on both slower private consumption and private business investment.
"However, recovery in housing will be a significant boost to GDP growth in H1 08 and will partly compensate for the expected weakness in private consumption and business investments. Hence, overall GDP growth is expected to remain close to trend in H1 ‘08," he added.
Nominal quarterly GDP was up 0.3% despite forecasts for an unchanged figure, while Q3's prior was revised to a 0.1% gain from a 0.2% rise. The annual GDP deflator was -1.3%, below forecasts for -0.9%, and the third quarter prior was revised to -0.6% from -0.4%.
The gains were led by a 0.5% quarter-over-quarter rise in domestic and private demand and a 0.6% increase in public demand. The rises, however, were slower than the fourth quarter's 1.9% increase in domestic demand, 1.8% rise in private demand, and 2.4% gain in public demand.
Private consumption also slowed in Q4, rising 0.2% q/q after Q4's 0.8% gain.
"The surge in GDP at the end of 2007 supports our non-consensus view that, rather than heading for recession, Japan will be the only major economy to grow at least as quickly this year as last," said Julian Jessop, chief international economist at Capital Economics. "It should also dampen speculation that the next move in Japanese interest rates will be a cut, although this speculation appears to be driven by what is happening in the US rather than what is right for Japan."
The Bank of Japan will announce interest rates this evening. The bank is widely expected to keep the key rate unchanged at 0.50%.
Asian stock markets reacted to the GDP data very positively as the Nikkei picked up about 588 points, or 3.2% following the release, and the Hang Seng rose 852 points for a gain of approximately 3.2%.
Although the yen did not immediately react to the news, Sue Trinh, Senior Currency Strategist at RBC, noted that "USD/JPY has yet to break 108.66, the 38.2% Fib retracement of the sell off from late-Dec to mid-January."
By Erik Kevin Franco, efranco@economicnews.ca, edited by Nancy Girgis, ngirgis@economicnews.ca
(END) ©CEP Newswires - ©CEP News Ltd. 2008. All Rights Reserved. www.economicnews.ca