Japanese GDP expanded a better-than-expected 0.5 percent in the first quarter of this year, official data showed yesterday, although analysts warned that the world’s third-largest economy was still facing headwinds.
It was the second successive expansion for the Japanese economy after growth of 0.4 percent in the fourth quarter of last year. The results defied gloomy expectations by analysts who predicted a small decline at the start of this year, but some economists warned that signs of weakness remained beneath the positive headline figure.
“The headline figures were unexpectedly good, but if you take a closer look, the data was not something we should be pleased about,” Norinchukin Research Institute lead economist Takeshi Minami said.
“Rather, the data clearly showed weak points in the economy with poor consumption and corporate investment on plants and equipment,” Minami said.
Net exports contributed strongly to the latest growth figures as a fall in imports outweighed a decline in exports, data from the Japanese Cabinet Office showed.
“There is no clear sign of a bottoming out in exports, production and business confidence, and so I don’t think we can be optimistic about the future of the economy,” Dai-ichi Life Research Institute lead economist Yoshiki Shinke said.
Nevertheless, the better-than-expected figure pushed up Tokyo stocks, with the benchmark Nikkei 225 rising 0.24 percent, or 51.64 points, to 21,301.73, while the broader TOPIX edged up 0.04 percent, or 0.67 points, to 1,554.92.
The latest data were being closely watched amid speculation that weak growth could prompt Japanese Prime Minister Shinzo Abe’s government to postpone a planned increase in sales taxes for the third time.
With global economic uncertainties — such as the US-China trade dispute and Brexit — some analysts have said that Abe might shelve the increase in the tax from 8 percent to 10 percent, which was previously expected in October.
Speculation is also mounting that he could use this decision to call a snap election over the summer, combining it with upper-house elections.
However, the strong headline GDP figure might dampen the speculation.
“For those who want to implement the tax hike as scheduled, today’s [yesterday’s] data is a tailwind,” Shinke told reporters.
Major Japanese business organizations support going ahead with the planned tax hike and top government spokesman Yoshihide Suga has recently said that the government would carry out the plan unless a crisis on the level of the 2008 financial meltdown happens.
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