Macro Monday:Japan 2Q GDP

Key data release: 2Q GDP (Monday)

The first preliminary estimate for April-June 2016 Japanese real GDP growth willprovide an indication as to whether there has been an uptick in growthmomentum. We are not optimistic.

Consumption remains the key: As shown below, consumption was a solidcontributor to growth in 2012-13. In advance of the April 2014 increase in theconsumption tax rate from 5% to 8% consumption was particularly strong. Theexpected two-quarter ‘give-back’ lasted a year, and even subsequentlyconsumption has barely contributed to growth. We attribute this to a policy offinancial repression. Please see the 18 May 2016 PEC’s Japan strategy:Consumption & services and the 29 July 2016 The BOJ disappoints again.