Analysts at Nomura are revising their outlook for the Japanese economy based on the first set of preliminary estimates for 2018 Q2 (Apr-Jun) GDP and are now projecting real GDP growth of +0.8% y-y in FY18, +0.7% in FY19, and +0.7% in FY20.
Key Quotes
“We revise down our FY18 and FY19 estimates by 0.2ppt and 0.1ppt, respectively, and leave our forecast for FY20 unchanged (our previous forecasts were as of 5 July 2018).”
“The sharp cut to our FY18 forecast is based on the assumption of a relatively substantial slowdown in real exports in the near term.”
“We expect economic growth to continue to slow gradually through FY20, mainly owing to external demand moving in tandem with global economic conditions.”
“Although we expect growth to gradually weaken, we look for real capex to expand at a healthy rate owing to (1) solid demand/production at domestic production equipment manufacturers buoyed by the global trend toward automating manufacturing processes, (2) strong demand for labor-saving technologies due to labor shortages, and (3) hearty construction demand in urban areas.”
“On the other hand, we think there is a risk that the US Trump administration’s protectionist trade policies could put a damper on corporate capex appetite worldwide. In addition, we must keep in mind that this poses considerable downside risk to capex in Japan as well.”
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