JAPAN DATA: The output gap — excess capacity vs. slack demand — stood
at -4.0% in the April-June quarter, revised from a preliminary -3.7%,
the Cabinet Office said on Friday. The Cabinet Office has revised the
figure as Japan’s real GDP in the April-June was revised down to
annualized -2.1% from a preliminary -1.3%. The output gap stood at -3.9%
in Q1, after showing -3.8% in Q4 2010. The negative output gap widens
when GDP growth falls below the economy’s potential growth rate. The
output gap is believed to influence prices with a lag of six to 12
months. Japan’s output gap has been improving gradually after hitting a
bottom of a revised -8.7% in Q1 2009.
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