 "Japan dodges recession")
Japan's economy dodged a recession last quarter as gains in government and consumer spending compensated for a slide in business investment.
Gross domestic product expanded by an annualised 1.7 per cent in the three months ended March 31, exceeding all forecasts in a Bloomberg survey of economists, a Cabinet Office report showed on Wednesday.
The October-to-December quarter was revised to a 1.7 per cent contraction, worse than the previous estimate of a 1.1 per cent drop. The decline in capital spending suggested that companies remain reluctant to deploy their stockpiles of cash, and underscored that Japan has a long way to go before pulling free of the cycle of expansion and contraction that's plagued the economy for decades.
"The GDP figures were much stronger than expected but when you take out the leap-year effect, the true condition in Japan's economy is continuing stagnation," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co in Tokyo. "A delay in the sales-tax hike and an economic stimulus package are becoming a done deal and today's report isn't enough to change this."
Despite more than three years of Abenomics and record monetary stimulus from the central bank, business spending fell 1.4 per cent in the first quarter from the previous three months. Private consumption rose 0.5 per cent from the previous period, when it dropped a revised 0.8 per cent.
For the financial year through March, nominal GDP rose 2.2 per cent, the largest gain in data back at least through 1997. The government's ultimate goal is 3 per cent. Unadjusted for price changes, GDP rose 0.5 per cent from the previous quarter, the same as the average in the previous three years.
Nominal GDP figures showed consumption, residential investment and capital spending all fell. Government spending rose. Inflation pressures are easing, with the GDP deflator rising 0.9 per cent from a year before, the least in two years. Good news on the wage front: compensation rose 0.6 per cent from the previous quarter, after a 0.5 per cent advance.
Net exports contributed 0.2 percentage point to quarterly growth. "By having one extra day, people will eat more and spend more," said Kohei Iwahara, the Tokyo-based director of economic research at Natixis SA. "This seemingly trivial point can make a difference when consumer confidence is falling and wage growth is subdued."
Consumer spending, which accounts for about 60 per cent of GDP, is likely to weigh heavily on the mind of Prime Minister Shinzo Abe as he contemplates whether to delay increasing the sales tax to 10 per cent from the current 8 per cent. A previous hike on the levy in 2014 pushed the economy into recession.
The Nikkei newspaper reported that Abe has decided to postpone the move and will probably make his decision public after hosting global leaders at a Group of Seven nations summit later this month. Senior officials in the ruling Liberal Democratic Party said the prime minister hasn't made a decision on the matter.
Gross domestic product expanded by an annualised 1.7 per cent in the three months ended March 31, exceeding all forecasts in a Bloomberg survey of economists, a Cabinet Office report showed on Wednesday.
The October-to-December quarter was revised to a 1.7 per cent contraction, worse than the previous estimate of a 1.1 per cent drop. The decline in capital spending suggested that companies remain reluctant to deploy their stockpiles of cash, and underscored that Japan has a long way to go before pulling free of the cycle of expansion and contraction that's plagued the economy for decades.
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The leap year provided an extra day of production and spending to bolster the data, and the outlook remains challenging given the resurgent yen and the possibility of a sales-tax hike in 2017.
"The GDP figures were much stronger than expected but when you take out the leap-year effect, the true condition in Japan's economy is continuing stagnation," said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co in Tokyo. "A delay in the sales-tax hike and an economic stimulus package are becoming a done deal and today's report isn't enough to change this."
Despite more than three years of Abenomics and record monetary stimulus from the central bank, business spending fell 1.4 per cent in the first quarter from the previous three months. Private consumption rose 0.5 per cent from the previous period, when it dropped a revised 0.8 per cent.
For the financial year through March, nominal GDP rose 2.2 per cent, the largest gain in data back at least through 1997. The government's ultimate goal is 3 per cent. Unadjusted for price changes, GDP rose 0.5 per cent from the previous quarter, the same as the average in the previous three years.
Nominal GDP figures showed consumption, residential investment and capital spending all fell. Government spending rose. Inflation pressures are easing, with the GDP deflator rising 0.9 per cent from a year before, the least in two years. Good news on the wage front: compensation rose 0.6 per cent from the previous quarter, after a 0.5 per cent advance.
Net exports contributed 0.2 percentage point to quarterly growth. "By having one extra day, people will eat more and spend more," said Kohei Iwahara, the Tokyo-based director of economic research at Natixis SA. "This seemingly trivial point can make a difference when consumer confidence is falling and wage growth is subdued."
Consumer spending, which accounts for about 60 per cent of GDP, is likely to weigh heavily on the mind of Prime Minister Shinzo Abe as he contemplates whether to delay increasing the sales tax to 10 per cent from the current 8 per cent. A previous hike on the levy in 2014 pushed the economy into recession.
The Nikkei newspaper reported that Abe has decided to postpone the move and will probably make his decision public after hosting global leaders at a Group of Seven nations summit later this month. Senior officials in the ruling Liberal Democratic Party said the prime minister hasn't made a decision on the matter.