Japan’s first-quarter growth was the strongest in over two years, data showed yesterday, as the nation’s cash registers rang up big sales ahead of a consumption tax rise that threatens to stall activity in the coming months.
Millions of shoppers scooped up everything from cars and refrigerators to televisions and alcohol in a buying spree that drove the 1.5 percent expansion in GDP for the three months to March.
That beat market expectations and a tepid 0.1 percent rise in the last quarter of last year.
Japan’s latest growth figures were the strongest since mid-2011, when the world’s third-largest economy bounced back in the aftermath of a quake-tsunami disaster.
“This is not normal and there will be a reaction to it,” said Takeshi Minami, an economist at Norinchukin Research Institute, referring to quarterly growth, which amounted to a sizzling 5.9 percent rise on an annualized basis.
“After this kind of rise, the fall back will not be small,” he added.
Sales taxes rose from 5 percent to 8 percent on April 1. Since then, Japanese auto sales dropped nearly 12 percent last month from a year ago, beer shipments fell by about one-fifth and department stores have seen a sharp drop-off in customer traffic, underscoring concerns about slower spending.
Yesterday afternoon, fresh figures showed a deterioration in consumer confidence last month that marked another worrying sign for the current quarter.
“The economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge,” said Marcel Thieliant, a Japan economist for Capital Economics.
However, “we remain confident that the recovery will resume in the second half of the year,” he added.
The IMF has cut back its expectations for Japan’s economy this year, and warned that Japanese Prime Minister Shinzo Abe’s drive to reverse years of tepid growth, dubbed Abenomics, was not complete.
“More than a year after the launch of ‘Abenomics,’ structural reforms and deregulation proposed by Prime Minister Abe to spur economic growth remain largely undefined,” Fitch ratings agency said in a report this week.
“Any reversal in optimism surrounding Abenomics could result in a deterioration of market conditions,” it added.
Bank of Japan policymakers have also cut their economic growth expectations, with Governor Haruhiko Kuroda saying he would “not hesitate” to unleash further monetary easing measures as the bank chases an inflation target seen as key to reversing deflation.
Policymakers expect the economy to expand by 1.1 percent in the fiscal year to March next year, down from an earlier 1.4 percent forecast.
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TRANSFORMATION: Taiwan is now home to the largest Google hardware research and development center outside of the US, thanks to the nation’s economic policies President Tsai Ing-wen (蔡英文) yesterday attended an event marking the opening of Google’s second hardware research and development (R&D) office in Taiwan, which was held at New Taipei City’s Banciao District (板橋). This signals Taiwan’s transformation into the world’s largest Google hardware research and development center outside of the US, validating the nation’s economic policy in the past eight years, she said. The “five plus two” innovative industries policy, “six core strategic industries” initiative and infrastructure projects have grown the national industry and established resilient supply chains that withstood the COVID-19 pandemic, Tsai said. Taiwan has improved investment conditions of the domestic economy
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