Japan GDP contracted -1.6% qoq in Q4, much worse than expectation of -0.9% qoq. In annualized term, GDP contracted -6.3%, biggest contraction in six years. Looking at some details, private consumption dropped -2.9% in response to the sales tax hike in October. Capital expenditure dropped -3.7%. External demand contributed to 0.5% point to GDP growth, in sufficient to offset -2.1% negative contribution from domestic demand. With impact from China’s coronavirus outbreak, contraction might extend into Q1, making it a technical recession.
Outlook is pessimistic too based on a Reuters survey that tracks BoJ’s Tankan. The Reuters Tankan manufacturer sentiments index rose from -6 to -5 in February. Services index rose from 14 to 15. Business confidence is not too much lifted by the US-China trade deal. The government might be forced to launch another around of fiscal stimulus soon to support growth.
