Japan's 2.8% GDP rise for Q4 is 'far above expectations'

Japan’s headline GDP figure for Q4 surprised market observers with an annualised leap to 2.8% compared to expectations of 1.1%.

Nikko AM’s chief global strategist Naomi Fink said the figure came in "far above expectations".

Fink said: "The figures for Q3 were upgraded as well from 1.2% to 1.7%, which reinforces the stronger growth environment.

"On a quarterly basis, this is 0.7% qoq vs 0.3% expected and 1.3% nominal growth. It is important that the above expectations real growth is despite the deflator coming in above expectations, up 2.8% yoy. Both private consumption and net exports were above expectations, the former up 0.1% qoq and with net exports making a positive contribution to GDP.

"The latter (net exports) were probably also influenced by the one-time surge in Q3 imports (e.g. the one-time effects of consumer goods related imports, which are positive for consumption). Capex remained strong but it contributed a solid (though less surprising) 0.5% qoq. These are all arguments for BOJ to continue normalizing, but CPI data Friday (ex fresh food seen well above target of 2%) will be an even greater focal point.”