Japan's Revised Q2 GDP Disappoints; BOJ Hike Unlikely

Japan's second-quarter (ended June) GDP declined more-than-expected, -1.2% vs. economists' average estimate of -0.7%, in a revised data release Monday. The Nikkei 225 lost 2.2%, as stocks were already under selling pressure following Friday's stock market weakness in the U.S., which included a 1.8% fall in N225 Sept. futures in Chicago. GDP was negatively impacted by a revised 4.8% decline in capital spending, compared to a preliminary estimate of +4.9%. The government's initial Q2 GDP reading was +0.5%. This is the first contraction of economic growth since Q3 2006 when GDP fell 0.4% annualized. Bond yields are now at their lowest levels in over a year and a half, as expectations of a follow-on Bank of Japan [BOJ] rate-hike on Sept. 19 now stand at 0% and are increasingly doubtful for the rest of the year. Meanwhile, the yen rose about 1.5% against the U.S. dollar to the 113.4 level, keeping pressure on exporter stocks like Sony (-6.0% to ¥5,300). Other big decliners included ORIX -3.9% to ¥21,800, Canon -3.7% to ¥6,050, Nomura -3.3% to ¥1,827, Mizuho FG -3.1% to ¥657,000, Mitsubishi UFJ -2.8% to ¥1.03M and Toyota -2.4% to ¥6,440.

Sources: Bloomberg, FT.com
Commentary: Would a US Recession Negatively Impact Japan? ?Preparing To Put Money To Work In Japan ?Japanese Property: Fear Has Overcome Greed
Stocks/ETFs to watch: MFG, MTU, IX, NMR, TM, SNE, CAJ. ETFs: EWJ, FXY

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