Japan posted stronger-than-expected growth in the first quarter as a pickup in capital spending powered the world’s No. 3 economy, but some economists warned that the recovery could be short-lived.
The 1 percent expansion in the January-to-March quarter — or 3.9 percent year-on-year — was sharply up from an initial estimate of 0.6 percent growth, according to Japanese Cabinet Office data.
The upbeat data is good news for Tokyo’s efforts to boost the economy, but household spending remains stubbornly weak as the Bank of Japan struggles to push up prices in a bid to end decades of deflation.
Photo: AFP
Despite wage rises at big firms and a tighter labor market, convincing people to spend on consumer goods has been a struggle after Japan raised sales taxes last year to help pay off a huge national debt.
The rise hammered consumer spending and pushed the economy into a brief recession. Japan limped out of the red in the last three months of last year with yesterday’s surprise figures offering some hope for better times ahead.
“The figures show the Japanese economy is gradually heading for recovery,” Credit Suisse economist Takeshi Saito said.
Corporate investment rose 2.7 percent from the previous quarter, well above an initial 0.4 percent expansion.
The growth figures were in line with the Bank of Japan’s assessment that the economy was on the rise, and might delay any further central bank stimulus.
“At the moment, [the Bank of Japan] is less likely to introduce another round of monetary easing,” Saito said.
However, Bank of Japan (BOJ) Governor Haruhiko Kuroda has been forced to push back a timeline for hitting a 2 percent inflation target — a cornerstone of Japanese Prime Minister Shinzo Abe’s plan to jump-start the deflation-plagued economy — although he insists that healthy price rises are around the corner.
Yesterday’s data contrast with revised US figures that show the world’s top economy contracted an annualized 0.7 percent in the first three months of the year, with the impact of a ports slowdown and cautious consumer spending worse than originally estimated.
The US is a major market for Japanese exporters and despite the apparent strength of yesterday’s figures, they also raise a red flag as they indicate firms’ inventories grew from three months earlier.
“This [inventory buildup] implies that the underlying pace of demand was not nearly as strong as the headline suggests,” Capital Economics Japan expert Marcel Thieliant said in a commentary, adding that consumer spending and industrial output remained lackluster.
“We... expect a sharp slowdown in GDP growth in Q2,” he said.
Separate data released yesterday show Japan’s current-account surplus jumped six-fold to ¥1.32 trillion (US$10.52 billion) in April, thanks to an improving trade picture and buoyant returns on company investments.
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