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Japan's economy grew at a quicker pace than estimated in the first quarter, as business spending increased more than previously reported.
Gross domestic product grew an annualised 6.7 per cent in the first three months of the year, the Cabinet Office said in Tokyo on Monday, faster than a preliminary 5.9 per cent and the median forecast of 5.6 per cent by economists in a Bloomberg News survey. The nation's current- account surplus narrowed in April from a year earlier, separate data showed.
Increasing strength in business investment would help the economy rebound from a forecast contraction this quarter after a sales-tax increase in April. A rebound in consumer confidence last month signals Prime Minister Shinzo Abe may be able to sustain the recovery's momentum to weather a planned further rise in the levy.
"Expectations for fiscal and monetary stimulus this year are fading," said Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong. "The slowdown in the second quarter doesn't look catastrophic, and the question now is how fast the pick up will be after then."
Business investment rose 7.6 per cent from the previous quarter, revised up from a preliminary 4.9 per cent increase.
Consumer spending climbed 2.2 per cent, more than an initial estimate of a 2.1 per cent gain. Separate data on Monday show consumer confidence rose in May for the first time in six months.
The 187.4 billion yen ($1.83 billion) surplus in the current account - the nation's broadest measure of trade - was smaller than the 287.7 billion yen median estimate of economists. A 14 per cent fall from a year earlier in income from overseas investments helped narrow the excess.
Sales tax
The benchmark Topix stock index rose less than 0.1 per cent, extending last week's gain to close at 1,234.78 in Tokyo. The yen rose was little changed at 102.45 per dollar at 3:43 pm.
Consumer confidence rose to 39.3 in May, the highest since January, according to separate data on Monday. Expectations for two-to-three months in the future among workers such as taxi drivers, supermarket managers and restaurant workers rose to the highest level since December, after jumping last month by the most since the survey began in 2000, a different poll on Monday showed.
Economic contraction
The economy will contract 3.5 per cent in the April-June period before expanding 2 per cent next quarter, according to a separate Bloomberg News survey conducted prior to Monday's release. Prime Minister Shinzo Abe will base a decision on raising the sales tax to 10 per cent from 8 per cent on July-September data.
"The key now is whether growth will recover enough in the second half of this year to allow Abe to proceed with the next sales-tax hike," said Junko Nishioka, chief Japan economist at Royal Bank of Scotland Group Plc in Tokyo.
A weak recovery may increase pressure on policy makers to add fiscal or monetary stimulus. Even so, banks from Barclays Plc to JPMorgan Chase & Co. currently don't expect the Bank of Japan to add to its unprecedented easing this year.
In parliament on Monday, Deputy Governor Kikuo Iwata reiterated that officials won't hesitate to adjust policy if needed.
Abe is due to detail this month a growth strategy that could help determine the long-term success of Abenomics in spurring a sustainable recovery. The economic plan is the "third arrow" of Abe's bid to boost the economy after fiscal and monetary stimulus.
"Abe needs to be focused now on delivering on the third arrow," HSBC's Devalier said.
