Tags: Japan | Economy | Grows | Rate

Japan Economy Grows at 3.5% Rate - Highest in a Year

Wednesday, 15 May 2013 08:52 PM

Japan's economy expanded more than analysts estimated in the first quarter on gains in consumer spending and exports, building momentum for Prime Minister Shinzo Abe's campaign for a sustained growth revival.

Gross domestic product rose an annualized 3.5 percent, the most in a year, a Cabinet Office report showed Thursday in Tokyo. The median estimate of 36 economists in a Bloomberg News survey was for a 2.7 percent gain. In the fourth quarter, growth was a revised 1 percent. GDP rose 0.9 percent on quarter.

Japan’s surging stock market is making consumers feel wealthier, helping to fuel spending and growth in the world's third-biggest economy. Now, Abe needs to convince businesses to invest and boost wages to pull the nation out of a decade-long deflationary funk, a challenge highlighted by a decline in company spending in the first quarter.

"The improvement in sentiment is leading a recovery in consumption," Norio Miyagawa, a senior economist at Mizuho Securities Research and Consulting Co. in Tokyo, said before the report.

Japan's economy is showing signs of making a comeback as central bank Governor Haruhiko Kuroda rolls out unprecedented monetary easing. Officials are seeking to contain volatility in the bond market as investors assess the likelihood of Kuroda fueling inflation.

Yen's Drop

The yen has weakened more than 16 percent against the dollar and 14 percent against the euro this year, the largest declines of the 16 major currencies tracked by Bloomberg News. The currency gained 0.2 percent to 102.10 per dollar as of 9:22 a.m. in Tokyo.

The Nikkei 225 Stock Average rose 45 percent this year, more than twice the gain in the Standard & Poor’s 500 Index.

Japanese government bonds halted the biggest three-day slide in almost a decade Wednesday after the central bank announced a 2.8 trillion yen ($27 billion) infusion of funds. Benchmark 10-year yields traded at 0.85 percent Wednesday after surging 25 1/2 points in the three business days from May 10.

The BOJ said April 4 it would double its purchases of government bonds to more than 7 trillion yen a month to achieve 2 percent inflation in two years. The government announced 10.3 trillion yen in extra spending in January to stimulate an economy that shrank for two quarters last year.

The expansion reported Thursday is the fastest since reconstruction spending boosted growth to a revised 5.3 percent in the first three months of 2012. Private consumption comprised about 60 percent of GDP last quarter, according to Cabinet Office data.

Rising Spending

Department store spending rose to the highest in a year in March, with consumer confidence climbing to a level previously seen almost six years ago.

Housing construction also supported growth in the first quarter, with construction starts rising for seven straight months through March, according to government data.

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