Japan’s GDP Needs Stronger Consumer Spending

Japan's latest GDP report suggests that Abenomics has done wonders to turn around Japan's disappointing 2014.

Summary

  • Japan's Q1 2015 economic numbers blow past prior estimates.
  • A 3% increase in the national sales tax may weigh heavily on Q2 and Q3 GDP.
  • Japanese yen trust (FXY) down 18% year over year, leading export growth.
  • Economics Minister Akira Amari says any unexpected moves in FX rates are not desirable, but financial markets will signal fundamental strength.

The world's third largest economy experienced its second straight expansion from quarter to quarter on data delivered early in June. Q1's annualized growth came in at 3.9%, stunning analysts' expectations.

The growth rate represents the largest expansion for Japan in two years. In light of the 0.9% drop in real GDP in FY2014, the Q1 outperformance reflects well on Shinzo Abe's stimulus package, known as Abenomics. Actually, unadjusted for price changes, Japan's GDP grew the most since Q2 1990.

The Spoils of War

The yen has lost more than 16% against the dollar since October of 2014. In that same time, the Euro fell 14% against the US dollar.

As Andy Mukherjee at Reuters puts it, the yen has won the "race to the bottom" and the outcomes are increased volumes for exporters.

currency wars

>> Full article over at SeekingAlpha.

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