Capital investment fuels faster growth in Japan’s economy
Print Edition
JAPAN’S economy expanded much faster than initially expected in the January-March quarter as companies ramped up capital investment, underscoring the central bank’s view that recovery from last year’s recession is gaining momentum.
The economy grew an annualized 3.9 percent in the first three months of this year, Cabinet Office data showed yesterday, handily beating a preliminary estimate of a 2.4 percent gain, and topping a median market estimate for 2.7 percent growth.
“This is a pretty positive figure and shows the recovery is picking up pace,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “Non-manufacturers are boosting spending on expectations that private consumption will recover, so this should serve as a key driver of growth.”
Capital spending rose 2.7 percent from the previous quarter, more than a preliminary estimate of 0.4 percent growth and above a 2.3 percent expansion projected in a Reuters poll.
Taking advantage of a weak yen, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere.
Panasonic has pulled back some production of room air-conditioners, and Canon has repatriated some output of high-end copiers.
Analysts say record profits and ample cash have finally started spurring firms such as industrial robot maker Fanuc Corp to invest more.
The data are welcome news for the government and the Bank of Japan, which are hoping that expectations of a steady economic recovery will spur companies and households to boost spending.
More capital expenditure is key for the success of Japanese Prime Minister Shinzo Abe’s stimulus policies, which aim to reflate the economy by changing companies’ perception that deflation will persist.
“The Japanese economy is returning to growth orbit,” Abe’s spokesman Yasuhisa Kawamura said on the sidelines of a summit of Group of Seven leaders on Sunday.
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