Japanese above-potential economic growth likely to resume in Q2 2018

Japanese above-potential economic growth is expected to resume from the second quarter of this year, noted Barclays in a research report. Even if private consumption fell in the first quarter, partially because of unseasonably cold temperatures, the household income environments is rebounding steadily, as clear from employee compensation, which rose 2 percent year-on-year in real terms and 3.2 percent in nominal terms, with the latter especially indicating a trend of quick acceleration. The rise in wage income is also evident from other wage data and this, along with a rebound in consumer sentiment amid rising employment, is believed to lead to a recovery in consumption going forward, stated Barclays.

Meanwhile, exports are likely to stay strong, in particular to the U.S. and China, owing to the brisk overseas demand. Also, private capital expenditure is expected to pick up momentum again from the second quarter, underpinned by slowing but still-elevated corporate earnings, demand to replace aging capital stock and construction investment for the Tokyo Olympics.

“Based on this week’s data, core orders, a leading capex indicator, fell m/m in March, but rose 3.3% q/q in Q1, and the Cabinet Office forecast growth of 7.1% q/q in Q2 based on its survey of major machinery makers”, added Barclays.

At 19:00 GMT the FxWirePro's Hourly Strength Index of Japanese Yen was neutral at -15.2979, while the FxWirePro's Hourly Strength Index of US Dollar was highly bullish at 160.332. For more details on FxWirePro's Currency Strength Index, visit http://www.fxwirepro.com/currencyindex

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