Japan’s economy, the world’s second biggest, expanded at faster pace than originally estimated in the first quarter as consumers spent more amid signs of a broadening recovery.
GDP expanded at an annualized pace of 5 percent in the January-March quarter, revised up from 4.9 percent in a preliminary report last month, the government said yesterday.
The upward change surprised economists — who had forecast a downward revision — and underscores that recovery in Japan’s economy has been gaining momentum.
Underpinning its growth are exports of cars, consumer electronics and other goods to a surging Asia and China, which is poised to overtake Japan’s economy in size sometime this year.
The robust demand from overseas is leading to higher production, investment and earnings at Japanese companies.
The annualized figure corresponds to quarterly growth of 1.2 percent, which is unchanged from initial estimates.
The updated calculations by the Cabinet Office revealed stronger consumer demand and higher spending on housing, combined with a milder decline in government investment. Corporate capital expenditures grew a less-than-expected 0.6 percent instead of 1 percent.
The encouraging numbers, however, are tempered by persistent deflation and other negatives. Lower prices may boost individual purchasing power, but deflation is generally bad for an economy.
A lackluster labor market — unemployment rose to 5 percent in March, which is high by Japanese standards — and worries about a potential global fallout from Europe’s debt problems are also hanging over the economy.
Given Japan’s limited trade volume with the EU, potential stagnation in Europe is unlikely to pose a major direct threat to Japan, said Junko Nishioka, chief economist at RBS Securities Japan Ltd.
“However, we think the indirect influence via China will be the biggest risks for Japan’s exporters, along with market fluctuation,” she said in a note to clients.
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