Japan economy dodges recession in Q1

Record ID: 102994

  • Title: Japan economy dodges recession in Q1
  • Date: 18th May 2016
  • Summary: OPPAMA, KANAGAWA PREFECTURE, JAPAN (FILE) (REUTERS) VARIOUS OF WORKERS ASSEMBLING VEHICLES IN NISSAN MOTOR'S FACTORY
  • Embargoed: 2nd June 2016 05:47
  • Keywords: economy Japan consumption first quarter GDP
  • Location: TOKYO, OPPAMA, JAPAN
  • City: TOKYO, OPPAMA, JAPAN
  • Country: Japan
  • Topics: Economic Events
  • Reuters ID: LVA0044IC35VX
  • Aspect Ratio: 16:9
  • Story Text: Japan's economy expanded at the fastest pace in a year in the first quarter thanks to a consumption boost from the leap year, a government release showed on Wednesday (May 18).
    The world's third-largest economy expanded by an annualised 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.
    "The GDP surpassed 500 trillion yen for the first time in eight years since 2007, and I believe we can confirm that Japan's economy is continuing on a moderate recovery trend and is escaping from deflation," government spokesperson Yoshihide Suga said during a regular news conference.
    Many analysts say the economy only narrowly dodged recession, defined as two straight quarters of contraction, after stripping out the estimated boost from the leap year.
    Private consumption, which makes up 60 percent of GDP, rose 0.5 percent, more than double the median market forecast, as households boosted spending on televisions, food and beverage, and recreation, the data showed. But the rebound failed to make up for a 0.8 percent drop in the previous quarter. "Private consumption is rebounding but admittedly, we believe, at a slow pace," added Suga.
    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 say.
    Local and overseas demand both added 0.2 percentage point each to gross domestic product (GDP) growth, thanks in part to a 0.6 percent rise in exports. On quarter-on-quarter basis, the economy grew 0.4 percent in January to March.
    The data also comes ahead of a Group of Seven leaders' summit Abe will host in western Japan next week, where he hopes to foster agreement on the need for global coordination of policies to jump-start growth.
    Japan's economy contracted in the final quarter of last year as slow wage growth hurt private consumption, while exports felt the pinch from sluggish emerging market demand and the pain of a strong yen.
    Abe raised the sales tax to 8 percent from 5 percent in 2014, which tipped the economy into recession. That led Abe to delay a second tax hike to 10 percent by 18 months.
    Meanwhile, Japanese stocks rose in choppy trade on Wednesday morning after the market digested stronger-than-expected GDP data.
    The Nikkei share average rose 0.6 percent to 16,750.73 in late morning trade. The broader Topix climbed 0.8 percent to 1,346.50 with all but two of its 33 subindexes in positive territory.
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