Due to the adjustment of construction orders data, Japan's GDP data for January to March will be revised, which has caused concern among many analysts; As GDP data may be substantially downgraded, analysts believe that this not only represents Japan's deeper economic contraction, but may also postpone the Bank of Japan's interest rate decision.
On June 26th, Cailian Press (Editor Malan) reported that the Japanese government announced on Tuesday that it will revise the data reflecting construction orders, and re-modify Japan's GDP data from January to March, with results to be officially announced on July 1st.
Some analysts say that given the significant downward adjustment of construction order data, the revised GDP data for January to March in Japan may also be significantly downward adjusted, which means that the contraction of the Japanese economy may exceed the previously disclosed value.
Yoshiki Shinke, Senior Executive Economist at Dai-ichi Life Economic Research Institute, said that the revised data may indicate that Japan's quarterly GDP growth rate in the first quarter will shrink by 2.7%, far exceeding the previously contracted rate of 1.8%.
Shinke warned that this revision may lead to a decline in Japan's fiscal year economic growth rate from 1.2% to 1.0% as of March this year, with the impact of various institutions including the Bank of Japan lowering its growth forecast.
He worries that this modification will also delay the Bank of Japan's interest rate decision. On July 30-31, the Bank of Japan will hold a policy meeting to discuss the next step in monetary policy. Shinke believes that if the Bank of Japan follows a significant downward revision of its fiscal year forecast for 2024, the rationale for supporting interest rate hikes will weaken.
Interest rate hike hindered
The Bank of Japan currently expects Japan's economy to grow by 0.8% in fiscal year 2024. If the economic trend meets its forecast, it will prove that Japan's inflation is expected to continue to meet the 2% policy target, and the central bank will proceed in raising interest rates.
However, the Japanese government's revision has made this action more complicated. Analysts predict that this data release may also affect the data for the third and fourth quarters of last year, which may result in greater deviation between economic targets and reality.
Many analysts originally expected the Bank of Japan to make an interest rate decision as early as July, but now this idea has been severely shaken, affecting multiple markets such as stocks, bonds, and exchange rates. Analysts warn investors to remain cautious about short-term volatility.
Sources close to the Bank of Japan have recently indicated that interest rate hikes in July are possible, but largely depend on the upcoming data. Given the inflation situation, Japan's current interest rate is clearly too low.
It also indicated that whether there is a market shock or a severe economic recession, interest rate hikes are topics for every meeting of the Bank of Japan's policy meeting, including the July meeting.