Japan: External demand-driven economic recovery continuing - Nomura

Japan's economy has been recovering since around the middle of last year, fuelled by increasing exports, and judging by trade data through February analysts at Nomura think exports have remained the driving force behind the nation's economy in Jan–Mar.

Key Quotes

“We think it highly likely that domestic output has remained firm also.”

“As one factor behind the recovery in external demand, we think exports to the US and Asia are expanding as a result of (1) expansion in household demand in the US supported by solid employment growth, (2) an increase in demand for infrastructure investment supported by expansion of fiscal spending in China, and (3) a recovery in demand for electronic equipment following the end of inventory corrections.”

“Acceleration in domestic demand needed for self-sustaining economic recovery

As noted, the rebound in Japan's economy has been powered mostly by an export recovery. For this external demand-driven economic rebound to evolve into a self-sustaining recovery, either domestic capex or consumer spending must pick up. With the nation's labor shortage increasingly stymying growth, our focus is on whether manufacturing and non-manufacturing capex can bounce back simultaneously.”