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Japan Gross Domestic Product

The growth estimate for the Japanese economy in the July-September quarter was revised to 0.3% quarter on quarter, revised down from the initial estimate of 0.5%.

Published quarterly by the Cabinet Office. Updated till the quarter of July-Sep 2016 (Second Preliminary estimate published on December 8, 2016).

Recent data trend

According to the second preliminary estimates by Cabinet Office, the Real GDP grew in the July-September quarter by 0.3% quarter on quarter (QoQ), down from the initial estimate of 0.5% QoQ. By components, growth in exports, private capital expenditure and inventory investment were revised down. Private consumption was revised upward, but not strong enough to offset other downward revisions. 

 

Perhaps more important though, the Japanese government implemented a significant change in the way they define GDP from today's release. The new definition follows SNA2008, an international statistical standard for the national accounts. Japan was in fact one of the last countries among OECD members not to be following the SNA2008 standard. Australia made the jump as early as in 2009. United States followed in 2013 and all EU member countries made the shift in 2014.

 

The most significant item in the SNA2008 is the recognition of commercial R&D as capital expenditure. Prior to SNA2008, commercial R&D was not considered as a final demand item, but as an intermediate input. For example, R&D for new vehicle design by Toyota were not included as a part of capital expenditure in the previous national account system in Japan. There were other changes such as capitalization of defense related products and inclusion of real estate transaction fee as a part of residential investment.

 

As a result of the shift to SNA2008, Japanese GDP in 2015 is estimated to be 6.3%, or 31 trillion yen larger, mostly as a result of the inclusion of commercial R&D as a part of GDP. While it is important to note that it is basically a change in the definition, we also notice that the growth rate of the Japanese economy seems materially faster when viewed in the newly available statistics. In the SNA2008 GDP, the Japanese economy grew by 0.3% and 1.2% in 2014 and in 2015. Previously, the growth was estimated to be 0.0% and 0.6%. The 0.6% boost to the growth rate in 2015 is quite significant. It shows that the newer and perhaps more value adding part of the Japanese economy were not well captured in the previous statistics.     

 

Brief overview of "GDP"

Gross Domestic Product (GDP) measures the market value of economic activities within a country, in our case, Japan. It includes some non-market services such as government services and imputed rents for owner-occupied dwellings, but it generally does not include unpaid activities such as volunteer and unpaid housework.     

Japan’s GDP was 475.7 trillion yen in 2012. Using the average USD/JPY rate of 79.8 for 2012, it translates into 5.96 trillion USD, placing Japan as the third largest economy after U.S. (15.68 trillion USD) and China (8.22 trillion USD). Germany was the 4th largest with a GDP of 3.4 trillion USD. In Japan, private consumption accounts for 60.9% of its GDP, followed by government consumption (20.5%) and private non-residential investment (13.4%). Exports and imports account for 14.7% and 16.6% respectively.

Japan’s GDP has been on a declining trend since 1997 when it was 523.5 trillion yen. The decline is due to low real growth (0.6% per year on average between 1997-2012) and outright deflation (-1.2% per year on average between 1997-2012).

For more information, visit the official government page

Nominal GDP

Real GDP-Annual data

Nominal GDP-Annual data

Source: Cabinet Office, JMA.

Source: Cabinet Office, JMA.

The Next Release Date: First Preliminary estimate for Oct-Dec 2016: February 13th, 2017.

                                            Second Preliminary estimate for Oct-Dec 2016: March 8th, 2017.