Japan’s economy grew at the fastest pace since 2011 in the first quarter

Japan’s Economy Accelerated in First Quarter
Date: May 14, 2014
Source: Bloomberg – By Keiko Ujikane

Japan’s economy grew at the fastest pace since 2011 in the first quarter as companies stepped up investment and consumers splurged before the first sales-tax rise in 17 years last month.

Gross domestic product grew an annualized 5.9 percent from the previous quarter, the Cabinet Office said today in Tokyo, more than a 4.2 percent median forecast in a Bloomberg News survey of 32 economists. Consumer spending rose at the fastest pace since the quarter before the 1997 tax increase, while capital spending jumped the most since 2011.

Today’s data add to signs the economy will have sufficient momentum to bounce back from the 3 percentage point levy rise that is set to trigger a contraction this quarter. Such resilience lowers the odds of any imminent extra easing by Bank of Japan and, if sustained, could persuade the government to proceed with a planned further increase in the tax rate.

“Maintaining capital spending growth will be a key factor” in sustaining the recovery, said Takuji Okubo, chief economist at Japan Macro Advisors in Tokyo. “The situation doesn’t warrant additional BOJ easing for now.”

Consumer spending rose 2.1 percent from the previous quarter, the highest since a 2.2 percent increase in the first three months of 1997.

The run-up in demand ahead of the tax rise was more than expected, Economy Minister Akira Amari told reporters in Tokyo today.

Business Investment
Capital expenditure increased 4.9 percent, the most since an 8.2 percent jump in the last three months of 2011, in the aftermath of the Tohoku earthquake and nuclear disaster. HSBC Holdings Plc economist Izumi Devalier said a statistical distortion may have pumped up the number.

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