TOKYO: Japan's economy grew a revised 1.2% in January-March from the previous quarter, surprising market players expecting a downward revision from the initial reading and boding well for the new government tasked with reining in the country's huge public debt.
But analysts say growth is likely to slow later this year as gains in consumption could moderate due to a lacklustre jobs market, while the impact of government stimulus spending is also seen wearing off. Europe's debt crisis also casts doubt on the outlook for Japan's exports to that region.
"The strong economic growth in the first quarter can be explained almost entirely by the effect of government stimulus measures and strong exports," said Junko Nishioka, chief economist at RBS Securities Japan.
"We expect economic growth to slow later this fiscal year as the stimulus effect tapers off."
Prime Minister Naoto Kan, who was sworn in on Tuesday, June 8, has said his cabinet will strengthen the economy, improve the welfare system and rein in public debts that are about twice the size of the economy.
The government is likely to announce this month a growth strategy to boost investment in new areas of growth such as healthcare. But Kan's cabinet could struggle to balance the need for fiscal spending with its pledge to fix the country's tattered finances.
Gross domestic product grew a revised 1.2% in the first quarter, matching the preliminary reading and more than the median forecast of a 1% expansion.
The revised figure translates into annualised growth of 5%, slightly more than the initial reading of 4.9%. The median forecast was for 4.2% annualised growth.
Capital expenditure rose 0.6% in the first quarter, revised down from a preliminary 1% increase but bigger than the market forecast of a revised 0.2% gain.
Wholesale prices rose 0.4% in the year to May, marking the first annual rise in 17 months, but the rise was due mostly to higher energy costs, Bank of Japan data showed on Thursday.
Japan pulled out of recession in April-June last year, helped by firm exports to Asia and firmness in consumption due to the government's stimulus measures, which included subsidies on energy-efficient cars and consumer electronics.
The subsidies are scheduled to expire by the end of this year and economists say the weak labour market means that gains in consumption are likely to slow.
Japanese companies have ramped up factory output due to overseas demand, but have been reluctant to invest in new plant and equipment on doubts about the strength of domestic demand. ' Reuters
But analysts say growth is likely to slow later this year as gains in consumption could moderate due to a lacklustre jobs market, while the impact of government stimulus spending is also seen wearing off. Europe's debt crisis also casts doubt on the outlook for Japan's exports to that region.
"The strong economic growth in the first quarter can be explained almost entirely by the effect of government stimulus measures and strong exports," said Junko Nishioka, chief economist at RBS Securities Japan.
"We expect economic growth to slow later this fiscal year as the stimulus effect tapers off."
Prime Minister Naoto Kan, who was sworn in on Tuesday, June 8, has said his cabinet will strengthen the economy, improve the welfare system and rein in public debts that are about twice the size of the economy.
The government is likely to announce this month a growth strategy to boost investment in new areas of growth such as healthcare. But Kan's cabinet could struggle to balance the need for fiscal spending with its pledge to fix the country's tattered finances.
Gross domestic product grew a revised 1.2% in the first quarter, matching the preliminary reading and more than the median forecast of a 1% expansion.
The revised figure translates into annualised growth of 5%, slightly more than the initial reading of 4.9%. The median forecast was for 4.2% annualised growth.
Capital expenditure rose 0.6% in the first quarter, revised down from a preliminary 1% increase but bigger than the market forecast of a revised 0.2% gain.
Wholesale prices rose 0.4% in the year to May, marking the first annual rise in 17 months, but the rise was due mostly to higher energy costs, Bank of Japan data showed on Thursday.
Japan pulled out of recession in April-June last year, helped by firm exports to Asia and firmness in consumption due to the government's stimulus measures, which included subsidies on energy-efficient cars and consumer electronics.
The subsidies are scheduled to expire by the end of this year and economists say the weak labour market means that gains in consumption are likely to slow.
Japanese companies have ramped up factory output due to overseas demand, but have been reluctant to invest in new plant and equipment on doubts about the strength of domestic demand. ' Reuters
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