Japan sees Q1 growth, but outlook still weak
Print Edition
JAPAN’S economy expanded at its fastest pace in a year in the first quarter, thanks in part to a leap year consumption boost, though analysts said the rebound is not strong enough to dispel concerns over a contraction this quarter.
With private consumption making only a feeble recovery from last quarter’s slump, the data keep alive market expectations that Prime Minister Shinzo Abe will delay a scheduled sales tax hike next year, analysts said.
The world’s third-largest economy expanded by an annualized 1.7 percent in the January-March period, much more than a median market forecast for a 0.2 percent increase and rebounding from a 1.7 percent contraction in the previous quarter, according to official data released yesterday.
Analysts had worried that the quarter would not produce enough growth to avert recession after stripping out the estimated boost from the leap year.
“Taking into account the effects of the extra day from the leap year, which pushed up the quarter-on-quarter growth rate by 0.3 percentage points, growth is not as strong as the headline number shows,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.
“The GDP data will likely press Abe to decide to delay a planned sales tax hike next year and to roll out additional fiscal stimulus worth 5 trillion yen (US$45.7 billion). I also expect the Bank of Japan to ease policy further in July given weak growth and tame inflation,” he said.
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