Sun | Apr 23, 2017

Japan economy gains speed

Published:Tuesday | June 9, 2015 | 6:00 AM

Japan's economy grew at a faster pace than initially estimated in the January-March quarter on stronger consumer and corporate spending, though economists anticipate slower growth in April-June.

The 3.9 per cent annualised growth rate announced Monday by the Cabinet Office was sharply higher than the 2.4 per cent pace initially reported. On a quarterly basis, the economy grew 1 per cent, compared with the initial estimate of a 0.6 per cent increase.

Strong private demand in residential and corporate spending helped push growth higher. Corporate investment was revised to a 2.7 per cent quarterly increase from the 0.4 per cent preliminary estimate.

The government has pointed to the stronger growth as a sign the recovery is gaining strength; however, rising inventories as factory output outpaced demand also contributed to the upward revision, suggesting that growth slowed in the current quarter.

"Core consumer spending fell to the lowest level since last summer in April, and industrial output may well have contracted this quarter. We, therefore, expect a sharp slowdown in GDP growth" in the second quarter, Marcel Thieliant of Capital Economics said in a commentary.

Residential and corporate investment have improved but other vital figures, including retail sales, auto registrations and machinery orders, indicate lingering weakness in overall demand.

Exports and public spending, meanwhile, continue to drag on growth.

Japan reported what by one measure was its largest increase in wages in a decade in April. Some experts say that suggests the recovery is on the cusp of passing the stage at which increases in incomes outpace inflation and spur more consumer and likewise corporate spending.

Private spending accounts for nearly two-thirds of Japan's economy and it rose only 0.4 per cent in the first quarter, signalling reluctance among consumers to splurge.

Though lower oil prices have stalled progress towards an official 2 per cent inflation target, Bank of Japan Governor Haruhiko Kuroda insists that a revival of confidence is inevitable.