HSBC:

  • Key factor behind downside GDP surprise was larger-than-expected inventory draw-downs
  • This is a positive development after large inventory accumulation in 2Q
  • But doesn’t change the fundamental picture of an economy struggling to rebound from April’s sales tax hike
  • GDP report shows growth was heavily dependent on public demand
  • Japan government is now likely to compile ‘fairly large’ extra budget
  • And … “With Japan now in the midst of a technical recession, we think Prime Minister Shinzo Abe will almost certainly postpone the next VAT increase, scheduled for October 2015″

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If you are just waking up Japan’s Q3 GDP was a negative, pushing the country back into recession:

GDP (seasonally adjusted) for Q3, preliminary: -0.4% q/q

  • expected 0.5%, prior -1.9% revised from -1.8%

GDP Annualized (seasonally adjusted) for Q3 preliminary: -1.6% y/y

  • expected 2.2%, prior -7.3%, revised from -7.1%