- Japanese GDP growth slowed to 0.3% on quarter in Q4 from 0.5% in Q3 and missed consensus of 0.7%.
- Annualized GDP softened to +1% from +1.1% and undershot forecasts of +2.8%.
- The GDP deflator, "which measures the change in prices of final goods and services and is considered as a key indicator for inflationary pressures," fell to -0.4% on year from -0.3%.
- Industrial production +0.9% in December vs -0.1% in November and consensus of +1.1%. On year, output +7.1% vs +4.8%.
- Capacity utilization +2.2% vs -0.5%.
- Japan's Q4 economic performance was kept down by strong import growth, which is a negative factor in GDP calculations, and a limited increase in exports.
- Imports +3.5% on quarter, exports +0.4%, business investment +1.3%, consumer spending +0.5%.
- The soft growth adds to pressure on Prime Minister Shinzo Abe to detail reforms that will make Japan more competitive. This is especially the case with the upcoming rise in sales tax in April.
- "This weak export performance gives us a sense of risk that the Japanese economy may significantly stall after April," says economist Takuji Okubo. "Abe really needs to be quick in showing to the market that he can deliver reform."
- The data comes a day before the Bank of Japan is forecast to leave its monetary policy unchanged.
- Despite the disappointing GDP, short covering helped the Nikkei end +0.6% following a day of choppy trading.
- The USD-JPY is -0.1% at 101.73.
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