Japan's Q1 GDP expands annualised 2.2 pct

Elias Hubbard
May 19, 2017

The economy grew 0.5% in the quarter, while the annualised rate of growth was 2.2% - the fastest rate for a year.

It marked the fifth straight quarter of expansion, the longest growth run since a six-quarter streak through 2006, when the Bank of Japan was exiting from its previous quantitative easing programme on signs of strength in the economy.

The Bank of Japan (BoJ), aiming to achieve two-percent inflation as a key part of Tokyo's growth bid, now expects to reach that goal by 2019 - four years later than planned.

"Public works spending is helping prop up growth this year but it's tough to imagine that private spending is going to be a driving force for the economy".

Economy Minister Nobuteru Ishihara said there was no change to the government's view that the economy continued to recover moderately, backed by a tightening job market. Japan's latest economic data certainly gives reason to think so.

Capital expenditure gained 0.2 per cent in the first quarter, confounding market expectations for a 0.4 per cent fall.

The latest numbers confirm that "the Japanese economy remains on solid footing", Naohiko Baba, chief Japan economist at Goldman Sachs, said in a research note.

Consumption has been a persistent weakness for Japan in recent years (especially after the two big rises in the country's sales tax) and the pick-up will encourage the Bank of Japan and the government that the highly stimulatory policies since 2013-14 are at last starting to have a sustained impact. This has made their products more competitive and has also boosted the value of profits overseas. Still, the real growth figures are trending in the right direction, and an uptick in Japan's perennially low consumer spending is a promising vote of confidence in the economy. But economists at BNP Paribas see signs that the recovery could be peaking, pointing to a slowdown in industrial output, imports and sales of automobiles in China in April.

That makes it all the more important for Japan to generate stronger momentum on its own.

"The Japanese economy probably won't grow dramatically, but it's not about to shrink either". Yet private consumption growth is projected to stay below 1% for the rest of the year, according to consensus estimates.

People are reflected in mirrors at an entrance of a shopping complex in Tokyo, Japan May 17, 2017.

Other reports by Click Lancashire

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