Japan economy exits recession
After stumbling out of recession last quarter, Japan's economy looks set to do something familiar this year: Slumber.
Helped by higher exports, the country's GDP grew an annualised 2.2 per cent in the last quarter of 2014, the government said Monday. But the recovery from six months of contraction was weaker than forecast.
For all of 2014, the world's No. 3 economy stagnated, neither shrinking nor expanding as the recession, which was triggered by a sales tax hike in April, cancelled out the growth that occurred at the beginning and end of the year. Wages, meanwhile, fell 0.1 per cent.
Experts expect a similar performance for the economy this year despite the government and the Bank of Japan's herculean efforts to end two decades of malaise.
"The weakness in domestic demand supports our view that output will essentially be flat this year," Marcel Thieliant of Capital Economics said in a commentary.
The lacklustre data highlight the challenges facing Prime Minister Shinzo Abe as he struggles to guide the country back to a sustainable level of growth, restore Japan's competitiveness, and also fix the country's tattered finances.
The fragility of Japan's economy since the global financial crisis has done little to help global growth, though its imports from the rest of Asia are aiding Southeast Asian nations. In a recent report, the World Bank attributed downward revisions in its global forecasts to weakness in Europe and Japan.
The bank forecast Japan's growth this year at less than 0.5 per cent. Capital Economics' forecast is 0.1 per cent.
Government spokesman Yoshihide Suga told a routine news conference that in light of the data, the government hopes for early passage of the annual budget to allow quick support measures.
"Recovery in consumer spending has been slow, household income is not keeping up with price increases and consumer sentiment is still at a low level," Suga said.
As its population ages and shrinks, Japan's demographic dividend from the post-World War II baby boom has shifted to a "demographic onus", according to Haruhiko Kuroda, who, as the central bank governor, carries much of the burden for making 'Abenomics' work.
Other countries will soon follow Japan in facing the intractable combination of a shrinking and ageing labour force and rising costs from a growing pool of retirees, he warned in a speech last year to the Bank for International Settlements.
Economists had mostly forecast growth at an annualised rate of about 4.0 per cent for the last quarter, following two straight quarters of contraction after the sales tax rose on April 1 to 8 per cent from 5 per cent.
That half-year contraction prompted Prime Minister Shinzo Abe to push back until April 2017 a tax hike planned for October of this year.
Private, non-residential investment grew an anaemic 0.4 per cent in the October-December quarter, suggesting that businesses and households, which account for the lion's share of growth, remain cautious about spending.
"We are disappointed that the pace of pick-up was weaker than expected," said Masamichi Adachi, an economist at JPMorgan Chase & Company in Tokyo. "I'm surprised consumption was so timid. We had expected it to accelerate towards the end of the year."
The economy expanded 0.6 per cent in October-December from the previous quarter.
Stronger demand in the US, Japan's largest export market, helped offset the impact of slower growth in China. Exports rose an annualised 11.4 per cent in the last quarter.
But as a net oil exporter, US growth is likely to moderate because of the recent plunge in crude oil prices,
"So this is critical to see a pick-up of growth in Europe and Japan," Adachi said.