Analysts at Rabobank point out that this morning saw the publication of Japan’s first preliminary estimate of Q2 GDP and the growth surged by 0.5% q/q, and as a result returned into positive territory for this year after the small 0.1% decline in the first quarter.

Key Quotes

“This was slightly higher than our expectations. Private consumption contributed 0.4% to quarterly growth as it increased by 0.7% q/q. As such, this was the most important driver of growth in the second quarter. Business investments contributed positively as well, but net exports subtracted somewhat.”

“Our Japan economist Björn Giesbergen expects moderate growth for the quarters ahead, based on accommodative monetary and fiscal conditions. But given that the economy is already running into capacity constraints (BoJ’s own output ‘gap’ estimate even surged to +1.7% in 2018Q1), he foresees slower growth than last year.”