By Satoshi Sugiyama and Tetsushi Kajimoto
TOKYO (Reuters) -Japan’s financial system contracted lower than initially reported in January-March on upward revisions to capital spending and stock information, lending modest help to the central financial institution’s plans to lift rates of interest once more this yr.
Analysts count on the Japanese financial system to have bottomed out within the first three months of the yr, though a stubbornly weak yen and disruptions at main automaker vegetation proceed to cloud the outlook for the present quarter.
Nonetheless, “the revised GDP results made it easier for the Bank of Japan (BOJ) to feel encouraged about future rate hikes as it can assess capital investment is picking up even by a little bit,” mentioned Kohei Okazaki, senior economist at Nomura Securities.
Japan’s GDP shrank a revised 1.8% annualised within the first quarter from the earlier three months, Cupboard Workplace information confirmed on Monday, a smaller decline that economists’ median forecast for a 1.9% contraction and a 2.0% decline within the preliminary estimate.
The revised determine interprets right into a quarter-on-quarter contraction of 0.5% in price-adjusted phrases, unchanged from the preliminary studying issued final month.
RATE HIKES
The revised GDP information comes on hypothesis the BOJ could talk about cuts in its Japanese authorities bond (JGB) purchases at its coverage assessment this week as a part of efforts to unwind financial stimulus to curb yen weakening.
Buyers are in search of clues on the timing of additional fee hikes by the central financial institution, which raised charges in March for the primary time since 2007 in a landmark shift away from ultra-loose financial coverage.
“We can say capital spending picked up in the latter half of the fiscal year-end in March 2024…current capex conditions are a relief but we must be cautious about the outlook,” Okazaki mentioned.
“We can also maintain the view that consumption is on track for recovery due to hefty pay raise agreed at annual labour talks and income tax cuts that kicked in from June.”
Personal consumption, which accounts for greater than half of the Japanese financial system, fell 0.7% within the first quarter, unchanged from the preliminary estimate as rising residing prices squeezed family funds. It was a fourth straight quarter of decline.
Exterior demand, or exports minus imports, shaved 0.4 of a share level off total GDP, whereas home demand knocked off 0.1 level, the information confirmed.