Positive headline numbers give temporary relief for BoJ

TOKYO – Japan’s GDP in Q3-16 has surprised on the upside by growing +0.5% QoQ, with net exports making the largest contribution. However, private demand remained weak overall, on the back of subdued real wages, low operating rates and falling corporate profits.

Because the pickup in exports is unlikely to be sustainable, the underlying growth is not strong, according to global investment manager Natixis.

“Nevertheless, Japanese policy makers could be relieved to see today’s strong headline results. The BoJ can justify the negative interest rate policy, as housing investment remained relatively strong,” Natixis says.

“With GDP growing for three consecutive quarters, the Government can implement the JPY28 trillion supplementary budget without facing pressure to organise a third stimulus package. Policymakers can save their ammunition for now.  www.natixis.com (ATI).