Japan’s Economy Grew at Faster Pace in 1Q After Capex Revision By Bloomberg

© Reuters. Japan’s Economy Grew at Faster Pace in 1Q After Capex Revision

(Bloomberg) — Japan’s economy expanded at a slightly faster pace than initially estimated in the first quarter, helped by an increase in capital spending despite fears over China’s slowdown and its trade war with the U.S.

Gross domestic product grew at an annualized pace of 2.2% in the three months through March, revised Cabinet Office data showed Monday. That compared with a preliminary reading of 2.1% and matched an estimate for the revised figure by economists.

Key Insights

  • The improved growth figure supports the government’s view that the economy is showing resilience in the face of slowing global demand and the trade war.
  • Speculation that Prime Minister Shinzo Abe might still postpone a sales tax increase amid fears over the economic outlook cooled further on Friday when his party pledged to go ahead with the hike in October in its election platform.
  • The growth figure still masks weakness in the economy, since much of the expansion is due to imports falling faster than exports, resulting in net exports boosting the economy on a technical basis.
  • Economists had expected an upward revision in GDP growth given stronger-than-expected capital expenditure figures for the quarter released a week ago.
  • While the GDP figures continued to show growth in the first quarter, the outlook has worsened considerably since a sharp escalation in trade tensions between the U.S. and China in May.

What Bloomberg’s Economists Say

“Looking ahead, fiscal stimulus and last-minute consumption ahead of the sales-tax increase in October are likely to support modest growth in 2Q and 3Q. But the risks are on the downside. The U.S.-China trade war threatens to damp exports. Risk-off sentiment could also push up the yen — cutting into Japan’s competitiveness and damping inflation.”

–Yuki Masujima, economistClick here the view the piece.

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  • Business investment rose 0.3% from the previous quarter. Economists forecast was for a 0.5% rise.
  • Private consumption slipped 0.1% from the previous quarter. The median estimate was for a 0.1% decline.
  • The current account balance for April showed a surplus of 1.7 trillion yen, compared with a 1.5 trillion yen surplus estimated by economists.

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