Goldman Warns Of 6.5% Japanese GDP Collapse, Worst Since Lehman

Goldman Warns Of 6.5% Japanese GDP Collapse, Worst Since Lehman | Zero Hedge

From Goldman's Naohiko Baba:

Japan Focus of the Week: June wages disappoint; watch for BOJ’s economic assessment 

Slowdown in June wages, special wages disappoint

June total cash wages rose 0.4% yoy, decelerating slightly from May (+0.6%). Basic wages turned to a small growth, but overtime wages decelerated.  Special wage, reflecting summer bonuses disappointed with only a small +0.3% increase.

Real disposable income drops sharply again in June / large negative GDP growth unavoidable for Q2

Based on the Household Survey, Q1 real spending rose 4.6% qoq on rush demand before the tax hike, but the Q2 pullback was higher at -9.4% qoq. One explanation was decline in real disposable income, which declined -8.0% yoy in June and -6% yoy on average for Q2. The difficult income environment is reflecting in consumer behavior.

June production declines far steeper than expected

Production decreased 3.3% mom in June (May: +0.7%), a far steeper decline than the market consensus (-1.2%) and the production outlook (-0.7%). Producer shipments were also down 1.9% mom in June, and this resulted in a sharp rise in inventories (of +1.9%).

Just as Abenomics is preparing to hit its 2-year anniversary, Japan's economy is on the verge of recession. And here is Goldman's punchline, one whose arrival we warned was only a matter of time.

The greater-than-expected weakness in the consumption snapback signals significant downside risk to our forecast of 4.6% decline for Q2 real GDP (sequential annualized).While we expect lower imports, higher inventories, and other factors to support GDP to some extent, we see negative real GDP growth of around -6.5% as likely, based on the data currently available.