Nikkei edges up, Q1 GDP data beat forecast but underlying picture still weak

TOKYO: Japan's Nikkei share average edged higher on Monday as growth in the nation's economy unexpectedly accelerated in the first quarter, although market gains were limited as the data also pointed towards lackluster domestic demand.

Nikkei ended 0.2 per cent higher at 21,301.73.

Data released on Monday showed Japan's gross domestic product (GDP) grew at an annualised 2.1 per cent in the first quarter versus expectations of a 0.2 per cent contraction. However, the surprise expansion was mostly caused by imports declining faster than exports, leading to a net exports contribution to GDP.


"The GDP surprised for the better and that's the main driver behind the stock market's gains. Those who bet on weak data were caught wrong-footed and reversing their positions," said Takashi Hiroki, chief strategist at Monex Securities.

Yet on the whole the GDP data "is not encouraging, with private consumption and capex declining and exports rising only because weak domestic demand depressed imports," he said, adding that Monday's market advance "is purely technical, few are buying because they think the economy is doing well."

Exporters gained as the yen weakened to a two-week low against the dollar.

NEC Corp added 1.4 per cent, Canon Inc rose 1.1 per cent and Nintendo Co 1.4 per cent.

Technology firms, on the other hand, sagged after U.S. counterparts slipped on Friday due to persistent trade tensions between the United States and China.

Tokyo Electron shed 3.1 per cent, Sony Corp fell 0.5 per cent and Toshiba Corp dropped 1 per cent.

Paper manufacturing company Hokuetsu Corp soared 9 per cent after forecasting a 62.9 per cent operating profit surge for the year ending March 2020.

TYK Corporation sank 19 per cent after the maker of heat resistant materials forecast its operating profit for the current financial year will likely decline by 30.3 per cent.

Of Tokyo's 33 sub-indexes, 21 were higher, led by real estate , while iron and steel tumbled.

The broader Topix was flat at 1,554.92.