Japan posts strong growth ahead of sales tax rise

Japan street crossing Japan is the world's third-largest economy, but has been grappling with deflation and stagnant growth

Related Stories

Japan's economy grew at the fastest pace in nearly three years in the first quarter due to increased spending ahead of a sales tax increase on 1 April.

Official data showed GDP rose 1.5% in the January-to-March period, against a revised 0.1% in the prior quarter.

The figure beat forecasts for 1% growth, and was led by consumer spending which rose by 2.1%.

Capital spending by businesses also outperformed, rising by 4.9%, which was more than double analyst expectations.

Private consumption accounts for about 60% of Japan's economy. However, economists warned that spending may taper off now that the April tax hike has been introduced.

"Japan's economy expanded rapidly ahead of the sales tax hike, but is set to slump thereafter," Marcel Thieliant, Japan economist at Capital Economics, said.

"Looking ahead, the economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge."

Trade deficit

Japanese Prime Minister Shinzo Abe has been trying to revive growth in the world's third-largest economy.

His policy of "Abenomics" has helped Japan's economy grow faster, but concerns remain about whether the recovery is durable.

Analysts warn that Japan's huge trade deficit could pose a risk to growth.

Data released on Monday showed that exports grew 6% quarter-on-quarter as a weaker yen made Japanese goods cheaper to overseas buyers.

However, the weaker currency has also made imports more expensive for Japan, which has continued to buy vast quantities of foreign fuel to compensate for its lack of nuclear power.

Bill Adams, senior international economist for PNC Financial Services Group, also expects an economic contraction in the second quarter.

"Japan's imports continued to grow faster than exports in the first quarter, as they have in each of the preceding two quarters," he said.

"Abenomics has boosted Japanese import demand more than the weaker yen is boosting Japan's exports."

More on This Story

Related Stories

More Business stories

RSS

Business Live

  1.  
    06:33: Royal Mail privatisation BBC Radio 4

    So the report into the stock market flotation of Royal Mail has been released but James Bevan, from CCLA Investment Management tells the Today programme the report tells us "very little about what actually happened. It's more of blueprint for what should happen in the future." He says the report seems to focus more on how to deal with institutional investors in any future privatisations.

     
  2.  
    06:27: Sony cancels The Interview Radio 5 live
    A banner for "The Interview"is posted outside Arclight Cinemas

    Sony Pictures has now cancelled the release of the film that provoked a cyber attack on the company. On Radio 5 live Steve Futterman, Los Angeles reporter for CBS Radio News, says it was primarily a business decision as five major theatre chains had abandoned the comedy (called The Interview), after the hackers made references to 911-style attacks. But Mr Futterman asks: Will the film have a video release or appear on a streaming service when the situation calms down?

     
  3.  
    06:19: US interest rates Radio 5 live

    "Markets are hugely relieved that the Fed will not be tightening rates any time soon," says James Bevan, from CCLA Investment Management. On Radio 5 live Mr Bevan says the markets are now betting there will not be a rise in interest rates during the next calendar year.

     
  4.  
    06:12: Cuba new era Radio 5 live
    Havana

    "It's quite a dramatic and unexpected step," says Phillip Oppenheim, managing director of coffee company, Alma de Cuba. That's after President Barack Obama announced moves to normalise diplomatic and economic ties. Mr Oppenheim thinks that announcement could make a real difference in two or three years time. He says that Cuba is very slowly being liberalised. It's become easier to set up small businesses, for example.

     
  5.  
    06:09: Royal Mail privatisation Radio 5 live

    Peter Hahn from Cass Business School explains that big institutional investors were approached in what's known as a "pilot fishing" exercise to ascertain a price Royal Mail. They, of course, were incentivised to quote a low price. Mr Hahn says that's a slightly simplified scenario - but was basically what happened. "IPOs (initial public offerings) are always more of an art than a science," Mr Hahn says on Radio 5 live.

     
  6.  
    06:07: Royal Mail privatisation
    Royal Mail"s Glasgow mail centre at St Rollox

    The government made £180m less from the £2bn sale of Royal Mail than it could have, a report commissioned by Business Secretary Vince Cable has said. It says shares could have been valued up to 30p more than the flotation price of 330p because of the high level of demand from banks and individuals. It said future government share sales should be more transparent and the pricing could be set at a later stage.

     
  7.  
    06:03: Markets boosted by US Fed

    US Federal Reserve chair Janet Yellen had some Christmas cheer for investors and borrowers on Wednesday when she signalled the central bank planned to be "patient" before raising interest rates. Most analysts had expected the Fed to signal its willingness to raise interest rates early next year but Ms Yellen's comments suggest the bank it wiling to wait a little longer. That's given markets a boost so far today.

     
  8.  
    06:02: Ben Morris Business Reporter

    If you want to get in touch you can email bizlivepage@bbc.co.uk or tweet us @bbcbusiness.

     
  9.  
    06:00: Matthew West Business Reporter

    Morning folks. It's going to be another busy morning by the looks of things. Yesterday's reassurance from the US Federal Reserve has cheered markets in Asia and even lifted the Russia rouble. Meanwhile, Royal Mail was "underpriced" by £180m, a report into its stock market flotation has found. There's lots more to come, so stay with us.

     

Features

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.