Slowing Japanese economy stokes fears about tax increase
By Peter Brieger ,AFP
February 18, 2014, 12:19 am TWN
TOKYO -- Japan's economy slowed to a crawl in the last quarter of 2013, data showed Monday, exacerbating fears that an April sales tax rise will derail Prime Minister Shinzo Abe's bid to stoke growth after almost two decades of deflation.
While the world's number three economy grew 1.6 percent over last year — its best performance in three years — it slowed to 0.3 percent in the October-December quarter, presenting a major challenge for Abe and his much-touted policy blitz, dubbed Abenomics.
The lackluster fourth-quarter growth was far lower than the 0.7 percent widely expected by economists, according to a Nikkei business daily survey.
And the full-year figure only modestly beat Japan's expansion in 2012 before Abe launched his bid to restore the country's fading status as an economic superpower.
Since the conservative Abe swept national elections in late 2012, the yen lost about a quarter of its value against the dollar — giving a boost to Japanese exporters.
The Nikkei shares index soared 57 percent in 2013, its best performance in more than four decades, while Japan's growth led G7 nations in the first half of last year.
Critics, however, fear that the controversial sales tax rise to 8.0 percent from 5.0 percent — seen as crucial for cutting Japan's eye-watering national debt — would curtail the budding recovery in an economy beset by years of deflation.
Data released last month showed Japan's consumer prices logged their first annual rise for five years in 2013.
Lackluster exports were largely to blame for the slowing growth, said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
“The Abenomics scenario of a cheaper yen leading to higher exports and higher consumption has not materialized,” Shinke told AFP.
“The lower yen has boosted stock prices, which propped up consumption. But export growth has not been strong.”
Japan is also saddled with ballooning trade deficits owing to a surge in energy imports after the tsunami-triggered Fukushima nuclear disaster in 2011.
Abe has called on firms to hike wages as consumers face higher prices for ordinary goods, while many complain they have yet to reap the benefits of the growth campaign.
Tokyo also launched a special US$50 billion stimulus package to counter any downturn from the nation's first sales tax hike since the late nineties, which shortly preceded years of tepid growth.