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March 9, 2017

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Home » Business » Economy

Japan GDP rises over estimate to grow 1.2%

JAPAN’S economy grew more than earlier estimated in the fourth quarter as capital expenditure grew at its fastest in almost three years, welcome news for policy-makers as they begin to discuss how to wind down years of massive stimulus.

The economy grew an annual 1.2 percent in the October-December quarter, less than the median estimate for 1.6 percent annual growth but more than the preliminary reading of a 1 percent annual expansion.

The figure translates into quarter-on-quarter growth of 0.3 percent, versus a preliminary reading of 0.2 percent growth and the median estimate for 0.4 percent rise.

A stronger pace of growth will be a boon to the government as policy-makers have been counting on an increase in business investment to drive future expansion and increase low productivity.

However, growth is still not robust enough to generate sustained inflation that the Bank of Japan wants, and the risk of rising protectionism could discourage Japanese exporters from raising wages, seen as key to boosting consumption and economic activity at home.

“The economy will remain in recovery mode, because we are seeing the benefits of capital expenditure from manufacturers and the construction sector,” said Shuji Tonouchi, senior market economist at Mitsubishi UFJ Morgan Stanley Securities.

“I am a little worried about the strength of consumer spending. I am still not sure how protectionism will materialize, but this is also a potential risk.”

Private consumption registered no growth in the fourth quarter, the same as preliminary data. Sluggish household spending has kept the country in prolonged deflation and been a key challenge for the BOJ in meeting its 2 percent price goal via its massive bond buying program.

Households cut spending for the 11th straight month in January even as the job market tightened more, separate data showed earlier this month. Private consumption takes up 60 percent of GDP.

The capital expenditure component of GDP rose 2 percent from the previous quarter, which was above the forecast for 1.7 percent growth, and faster than the preliminary 0.9 percent.


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