Japan GDP miss shows economy is ‘flatlining’

Added 15th August 2016

Japan reported annualised GDP growth in the period from April to June of just 0.2%, undershooting modest forecasts of 0.7%.

Japan GDP miss shows economy is ‘flatlining’

The news comes soon after the Bank of Japan announced $45bn of news measures to stimulate the economy.

These include financing for infrastructure projects such as new train lines, more funds for local governments to spend, increased benefits paid out to people on low incomes as well as finance to help with the recovery from the 2011 earthquake and tsunami.

According to Fathom Consulting, the data release shows Japan's economy has ‘flatlined’.

Fathom noted that this reflected both ‘weak domestic and external demand’ with net trade knocking 0.3 percentage points off quarterly growth.

“Frustratingly for Japan's policymakers, recent efforts to resuscitate the economy have underwhelmed, and the yen has continued its ascent,” Fathom said. “Under our risk scenario, where the yen continues to strengthen on the back of safe haven flows, the Bank of Japan's hand is forced and helicopter money is on the cards by the end of next year.”

Nathan Sweeney, senior investment manager at Architas was also unimpressed.  “Japan’s Cabinet Office today released a preliminary estimate of Q2 GDP growth for the country, revealing that the economy grew by an annualised 0.2% in the second quarter,” he said. “This is largely below expectations, as a drop in net exports, caused in part by the stronger yen, proved to be a significant drag.”

“While the Japanese economy clearly faces headwinds, the authorities are demonstrating their willingness to address these issues,” Sweeney continued. What’s more, our underlying managers continue to report positively on the health of the Japanese corporate landscape; across value and growth funds, we believe there remain attractive opportunities for discerning stock pickers.”

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Alex Sebastian

News editor

Alex joined Portfolio Adviser in April 2014 and has been a financial journalist since 2008. He has previously held editorial positions at the Financial Times Group and Euromoney Institutional Investor. Alex is NCTJ qualified and has a degree in economics from the University of Sussex.



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