News Worms
News Worms

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Today's positive data should offer some relief to Bank of Japan policymakers, who hope the economy is now gathering enough momentum to drive up inflation that remains stubbornly below their 2% target.

Japan has posted its longest economic expansion in over a decade, government data showed today, chalking up a win for Tokyo's growth bid even though the battle to conquer deflation is still far from won.

Japan's prospects have been improving on the back of strong exports, with investments linked to the Tokyo 2020 Olympics also giving the economy a shot in the arm.

The preliminary estimate from the Cabinet Office (the first of several) for the three months to March was up a full percentage point from the 1.2% annual rate in the December quarter and came in well above market forecasts of 1.7%.

Corporate capital spending, a key indicator watched closely by the government of Prime Minister Shinzo Abe, gained 0.2 percent, following a 1.9 percent gain in the previous quarter.

These new figures mean that Japan has recorded its longest period of growth in more than a decade.

"Public works spending is helping prop up growth this year, but it's tough to imagine that private spending is going to be a driving force for the economy", Norinchukin Research Institute economist Takeshi Minami said in a statement. "But the economy passed the grade both in terms of the pace of growth and the quality of the expansion".

But consumer prices are barely rising as firms remain wary of increasing wages, keeping the BOJ under pressure to maintain its massive stimulus despite improvements in the economy.

Net exports contributed 0.6 percentage points to growth while consumption contributed 0.8 percentage points (imports detracted 0.2 percentage points from growth).

The latest reading matched market expectations.

Nominal GDP was flat on quarter, missing forecasts for a gain of 0.1% and down from 0.4% in the previous three months.

"The Japanese economy probably won't grow dramatically, but it's not about to shrink either".

"I think the economic recovery will eventually push up wages and prices, but the pace will be slow".


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