Japan's Q1 growth fastest in more than two years
June 10, 2014, 12:00 am TWN
TOKYO--Japan's economic growth in the first three months of 2014 hit its fastest pace in more than two years, data showed Monday, while analysts said a pick-up in consumer confidence indicated sentiment was improving despite the impact of a sales tax hike.
A surprise jump in capital spending powered the 1.6-percent expansion in the world's number-three economy between January and March, slightly better than an initial estimate of 1.5 percent.
It also marked the best quarterly advance since a 2.6-percent rebound several months after the 2011 quake-tsunami disaster.
Cash registers across Japan rang up big sales ahead of the April 1 consumption tax rise, a move seen as crucial to paying down a massive public debt but which critics warn could throw a nascent recovery off track.
Millions of shoppers scooped up everything from cars and refrigerators to televisions and alcohol in a spending spree that resulted in a 6.7-percent annualized first-quarter expansion in the economy — a hypothetical figure that shows growth stretched over a full year.
However, consumers have since reined in their buying, with figures this month showing household spending down 13.3 percent in April while retail sales suffered a similar slump.
Industrial production also slowed, exacerbating fears about the impact of higher sales taxes and renewing calls for more monetary easing by the Bank of Japan (BOJ).
But fresh consumer confidence figures on Monday afternoon showed that sentiment rose in May, the first improvement in six months and offering hope that domestic demand was holding up better than some had expected.
“The rebound in consumer confidence last month suggests that the gloom resulting from the sales tax hike has started to fade,” said Marcel Thieliant of Capital Economics.
Also Monday, current account figures for April offered some good news for the tourism industry as foreign visitors spent more money than Japanese holidaymakers traveling overseas for the first time since 1970.
The number of visitors to Japan in April surged 33 percent to record 1.23 million as the country looks to boost arrivals ahead of the 2020 Tokyo Olympics.
Call for Reforms
Still, many economists think the BOJ will be forced to launch new measures later this year to counter a downturn.
That was highlighted last month by the International Monetary Fund which said “the current aggressive pace of monetary easing may need to be maintained for an extended period.”