The three main points from our prior report on this topic have not changed; however, there are a few more anomalies in the data this time, which street economists are mystified by, and since this report will likely generate discussion, we will address it.

First, one should note that prior periods were revised up, so although revised down on a QoQ change basis, 3QCY14 Japanese Real GDP (in Yen) is now actually higher than previously estimated! This is especially true of the real capex component, which is now almost 1% higher than previously estimated, despite being revised down greatly on a QoQ basis. Furthermore, real capex is not following its "lead indicator," which baffled economists, nearly all of whom expected it to be revised upward this time. Moreover, the "discrepancy factor" (the difference between the sum of the real components and total real GDP) remains largely negative and means that GDP is likely understated.

Second, real inventories fell less than previously reported (and prior quarter inventories were revised upward), but they remained negative QoQ, which seems illogical. Real inventories are subject to massive revisions, so a further upward revision would not be shocking at all. Additionally, real inventories should build in future quarters, which should boost GDP quite significantly, in our view.

Third, nothing has changed as regards the upward trend in listed-company profits (as they have little correlation with GDP except during large global swings) or the 4QCY14 GDP data. Indeed, if this downward revision of GDP growth was actually indicative of a trend, it would be more concerning, but the chance of the 4QCY14 and the 1QCY15 remaining in recession is extremely low, in our view (and in the consensus view), especially now that the Yen has normalized even further.

Thus, the conclusion from our previous report still stands: "In sum, the bad economic data should not worry investors in Japanese risk assets very much at all." Indeed, it certainly has not bothered investors so far, as TOPIX has risen quite smartly since the first GDP report for the 3QCY14 purported that Japan was in recession.