Japan fourth quarter 2015 GDP falls more than expected

Japanese economic activity slowed more than was expected at the end of 2015, as household consumption dropped sharply.

Gross domestic product in Asia's second-largest economy shrank by 0.4% quarter-on-quarter in the last three months of 2015, according to the country's Cabinet Office.

In annualised terms GDP declined by 1.4%, whereas economists had penciled in a drop of 0.8%.

“There’s a high chance that the BOJ may take additional easing at the next meeting in March. The downside risks to the BOJ’s outlook on growth and inflation are increasing,” Masamichi Adachi, an economist at JPMorgan Chase & Co. and a former central bank official, told Bloomberg before the GDP data.

Household consumption fell by an outsized 0.9% in the fourth quarter of 2015, after an increase of 0.4% in the third quarter, and government expenditures by another 0.1%.

Gross fixed capital formation was the only component of aggregate demand to register positive growth, rising by 0.1% over the quarter, with a 1.4% gain in non-residential private investment offsetting a 1.2% decline in private residential investment.

Exports fell by 0.9% quarter-on-quarter and imports by 1.4%, with net exports thus adding 0.1 percentage points to the rate of growth in GDP.

Some market commentary highlighted how preliminary Japanese GDP data releases were typically subject to large revisions.

As of 10:09 the dollar/yen was rising 0.60% to 113.97 after the release of the data.

Weakness in the currency drove the benchmark Nikkei-225 to a 7.16% rise on Monday to 16,022.58.