Japan: Strong GDP figures - BBH

Analysts at BBH explain that the 4.0% annualized expansion in Japanese GDP easily beat estimates for a 2.5% gain and 1.5% in Q1.  

Key Quotes

“Private consumption rose 0.9%, nearly twice what was expected.  Business spending was also twice as strong as expected, rising 2.4%.  Net exports shaved 0.3%.  Public investment gained 5.1% in Q2.  The one troublesome element was the minus0.4% GDP deflator.”    

“The 1% quarterly expansion for Japan puts it atop the G7.  Senior BOJ officials had intimated if the global economy recovery spilled over and lifted the Japanese economy then officials might consider increasing the 10-year yield target, which is now +/- 10 bp around zero.  We suspect that it will take a further rise in other benchmark yields, including US Treasuries to prompt such a discussion.”  

“After dipping below JPY109 before the weekend, the greenback rallied to JPY109.80 steadily through the European morning.  There is a large (~$1.2 bln) option struck at JPY110.  The euro has approached the JPY129.70 area, which is a retracement objective of the decline since JPY131.40 was seen on August 2.”