Japan’s economy dodges recession in first-quarter, sales tax decision eyed

(From Reuters)

Japan’s economy expanded at the fastest pace in a year in the first quarter, thanks in part to a leap year consumption boost, but analysts say the rebound is not strong enough to dispel concerns over a contraction this quarter.

With private consumption making only a feeble recovery from last quarter’s slump, the data keeps alive market expectations that Prime Minister Shinzo Abe will delay a scheduled sales tax hike next year, analysts said.

The world’s third-largest economy expanded by an annualized 1.7 percent in January-March, much more than a median market forecast for a 0.2 percent increase and rebounding from a 1.7 percent contraction in the previous quarter, Cabinet Office data showed on Wednesday.

Analysts had worried that the January-March period would not produce enough growth to avert recession – defined as two straight quarters of contraction – after stripping out the estimated boost from the leap year.

“Taking into account the effects of the extra day from the leap year, which pushed up the quarter-on-quarter growth rate by 0.3 percentage point, growth is not as strong as the headline number shows,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. Read more



Categories: Asia Unhedged, Japan

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