Despite all the hype of a global synchronous recovery, Japan's Q1 Real GDP tumbled 0.6% QoQ (on an annualized basis) - the worst drop since Q4 2015 - and well below expectations.
Under the hood it's just as ugly...
- Nominal GDP dropped 0.4% QoQ (vs expectations of a 0.1% gain)
- Business Spending dropped 0.1% QoQ (vs expectations of a 0.4% rise)
- Private Consumption was unchanged QoQ
And after 8 straight quarters of improvement - that was the longest stretch of uninterrupted growth since a 12-quarter run that ended in 1989 - Japan's economy shrank again in Q1...(and the previous quarter got revised sharply lower)
Excuses were ample...
“Consumer spending dipped because of weather reasons, heavy snow,” Hiroaki Muto, chief economist at the Tokai Tokyo Research Center, said before the results were released.
"We have to keep a close eye on whether there’s a recovery in the second quarter,” he said. "The dip is probably temporary, and I don’t see GDP contracting in the April-June quarter, but it’s possible that a longer-than-expected global economic soft patch is beginning to have an effect on the Japanese economy."
Bloomberg notes that the first-quarter slowdown likely sapped progress on inflation -- Goldman Sachs predicted core inflation fell in April to 0.7 percent. Yet most economists see GDP rebounding in the current quarter, fueled partly by better export growth and production (just as they did in Q1!!).
Of course, the great news is that this gives Kuroda and Abe ever more excuses to repress ever more financial instruments and monetize ever more debt for just a little bit longer.
If you look carefully you will see USDJPY reacting to this dismal number...
As Bloomberg's Mark Cranfield remarked: "The jokes about the BOJ never being able to exit QE might not be as funny to Japanese policy makers after this. "
Still if that data was not enough for you to see, maybe this will help...
Global Macro Surprise data is its worst since March 2016 - the global growth scare - and all because China's credit impulse has reversed.