Japan's economy grows 1.0% on rebuilding spending

Martin Schultz from the Fujitsu Research Institute explains what would be needed to support long-term growth in Japan.

Japan's economy grew 1.0% between January and March compared with the previous three months, as government spending helped fuel a gradual recovery from last year's earthquake and tsunami.

That translates to annualised growth of 4.1%, the Cabinet Office said.

A recovery in private consumption has also helped boost the economy.

However, analysts were still cautious about the future, as growth slowed in the US, Europe and China.

Reconstruction spending

"The data does not change the outlook for the economy," said Takeshi Minami, from Norinchukin Research Institute in Tokyo.

"Consumer spending is proving robust but the key to sustainability for the economic recovery is whether or not exports regain strength."

The main drivers of growth were public investment and consumer spending, which analysts said were helped by extra budgets after the earthquake.

Prime Minister Yoshihiko Noda has pledged more than 20tn yen ($249bn; £156bn) on reconstruction.

"With government polices behind the quarterly growth, we can't say this is a reflection of real strength in the Japanese economy," said Yoshimasa Maruyama from Itochu Economic Research Institute in Tokyo.

Devastated Kesennuma city in Miyagi prefecture Growth was fuelled mainly by rebuilding after the earthquake and tsunami
Outpaced

The expansion in Japan, however, exceeded that of many major industrial nations. The US reported 2.2% annualised growth in the same three months.

Japan also outperformed Germany, Britain and France.

Martin Schultz from Fujitsu Research said the data out on Thursday had made him very optimistic for the year.

"We did know there is a huge amount of money for reconstruction but we didn't know how positive the impact is. We know now this is a positive," he said.

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