Excessive yen depreciation not yet a concern

The revised Q1 GDP figure (1.0% qoq or 3.9% qoq annualised) confirmed that Japan corporate activity is accelerating, stimulated by Abenomics policies. Abenomics is successfully progressing towards a complete exit from deflation. Societe Generale have revised up slightly our 2015 GDP forecast to 1.3% from 1.2%. Although we remain above consensus, the current consensus of 0.9% will probably be revised upwards, said Societe Generale 

Private inventory has made a significant contribution to Q1 real GDP growth, and it was further revised up to +0.6pp (from +0.5pp). The change in inventory investment remained negative in Q1, which means that the pace of the decrease in inventory investment has slowed down as corporate activity is becoming strong. 

However, a negative change in inventory investment means that the economic outlook and inflation expectations of corporates are not yet strong enough for Japan to achieve the 2% price stability target set by the government and the BoJ. It also means that cost increases due to full employment or excessive yen depreciation is not yet a risk to corporate activities. So talk of concerns about an overheating economic situation or the adverse effects of excessive yen depreciation is still premature.