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Japan’s Q2 GDP Growth Fastest in 2 Years: 5 Stocks to Buy

Zacks

In the second quarter, Japan’s economy grew an annualized 3%, its fastest pace in more than two years. The increase can be primarily attributed to increased investment in business. This definitely will bring relief to policymakers, who have been worried about the negative impact on global economic growth from increasing trade tensions between the United States and China.

Analysts have been raising doubts about the strength in Japan’s economy after recent data hinted at lower factory output and exports. However, the revised data definitely is an indication that Japan’s economy is rebounding after a temporary slowdown in the previous quarter. Moreover, Japan’s household spending rebounded in July, as higher bonus payments pushed up wages. Given this scenario, it makes this a good time to invest in Japan’s stocks.

Japan’s Economy Rebounds


In the April-June quarter, Japan’s economy grew at its fastest pace since the first quarter of 2016, much faster than previously reported. The initial reading was for 1.9% expansion. The upward revision is a clear indication that the world’s third-largest economy is rebounding after a temporary slowdown in the previous quarter, following two years of continued expansion.

The extent of growth can be mainly attributed to an increase in business investment. The capital expenditure component of GDP grew 3.1% in the second quarter, higher than the preliminary 1.3% growth. Also, this is the fastest growth since the beginning of 2015.

Economy Strong In Spite of Trade War Fears

Revised GDP figures will definitely bring a sigh of relief to policymakers, who have been worried about growing trade tensions between the United States and China, as that could affect global economic growth. This could further damage Japan’s economy, which is export reliant.

Trade war fears have been keeping Japan’s policymakers under pressure. However, fresh GDP numbers are an indication of the strength in Japan’s economy. Private consumption, which accounts for 60% of the GDP, increased 0.7% in the second quarter compared with the previous quarter. Net exports contributed 0.1% to the GDP in the second quarter.

Also, Japan’s household spending rebounded in July after five straight months of decline, as higher bonuses led to wage growth. Household spending increased 0.1% in July from a year earlier. Moreover, a tight job market is also prompting a rise in consumer spending.

Our Choices

It goes without saying that Japan’s economy has rebounded after a temporary slowdown in the previous quarter following two years of continued growth. Trade tensions have kept policymakers worried but the revised GDP data definitely reflects the strength in the country’s economy.

Given this scenario, adding stocks from Japan to your portfoliolooks like a smart option at this point. However, picking winning stocks may be difficult. We have narrowed down our search to the following stocks based on a good Zacks Rank and other relevant metrics.

Sony Corporation SNE develops and manufactures consumer and industrial electronic equipment.

The company has expected earnings growth of 26.8% for the current year. The Zacks Consensus Estimate for the current year has improved by 8% over the last 60 days. The stock carries a Zacks Rank #1 (Strong Buy). You can see the complete list of today’s Zacks #1 Rank stocks here.

Advantest Corporation ATEYY is one of the world's leading automatic test equipment suppliers to the semiconductor industry, and is a producer of electronic and optoelectronic instruments and systems.

Advantest has a Zacks Rank #1. The company has expected earnings growth of more than 100% for the current year. The Zacks Consensus Estimate for the current year has improved by 13.4% over the last 60 days.

Nikon Corporation NINOY is a Japanese multinational corporation headquartered in Tokyo, Japan, specializing in optics and imaging products.

Nikon has a Zacks Rank #1. The company has expected earnings growth of 57% for the current year. The Zacks Consensus Estimate for the current year has improved by 20.4% over the last 60 days.

TDK Corporation TTDKY has a portfolio of technologies originally developed for its businesses involving electronic materials, components and devices, semiconductor, recording media and data storage devices.

TDK has a Zacks Rank #2 (Buy). The company has expected earnings growth of 22% for the current year. The Zacks Consensus Estimate for the current year has improved by 3.2% over the last 60 days.

Hitachi, Ltd. HTHIY, headquartered in Tokyo, is one of the world's leading global electronics companies.

Hitachi carries a Zacks Rank #2. It has expected earnings growth of 6.1% for the current year. The Zacks Consensus Estimate for the current year has improved by 2.9% over the last 60 days.

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