Revised Estimates of Japan's 4th Quarter GDP Shows a Rise Instead of a Decline, Due Mostly to Inventory Accumulation

Japan's second estimate of last year's fourth quarter Real Gross Domestic Product changed the previously reported decline of 0.12% from the third to the fourth quarter to an increase of 0.20%. In nominal terms, the second estimate shows a rise of 0.25% compared with the first estimate of 0.02%. There were many and large changes in the earlier estimate but it is still not clear that Japan is on the start of a steady upward path. There is, however, a hint that deflation may ending or at least waning. The revised data show that for the second consecutive quarter, the increase in the nominal value of GDP was less negative or exceeded the increase in real value. The percentage changes in real and nominal GDP are shown in the attached chart.

In the table below we show the first and second estimates of the increases in the yen value of the components of nominal GDP. The changes in the nominal figures are additive whereas those expressed in chained yen are not.

An improved picture of consumption and a somewhat smaller decline in net exports emerge from the revisions. The revised figures show a smaller decline in private consumption,-424.3 billion yen vs.-535.4 billion yen, and a bigger increase in government consumption.790.0 billion yen vs. 566.4 billion yen. Net exports contributed a smaller negative to GDP, largely because imports were overstated in the first estimate. But the significance of the changes in the data relating to the business sector are less clear cut.Fixed investment was weaker than earlier estimated, but inventory accumulation was extremely strong. Fixed investment declined by 117.5 billion yen instead of the 532.6 billion rise estimated earlier and inventories rose by 1,087.5 billion yen in contrast to the 92.4 billion yen decline estimated earlier. Growth based on inventory accumulation is tentative at best.