Tags: japan | economy | growth | investment

Japan's GDP Unexpectedly Accelerates in Q1 as Firms Boost Investment

Monday, 08 Jun 2015 10:48 AM

Japan's economy expanded much faster than initially expected over January to March as companies ramped up capital investment, underscoring the central bank's view that recovery from last year's recession is gaining momentum.

The economy grew an annualized 3.9 percent in the first three months of this year, Cabinet Office data showed on Monday, handily beating a preliminary estimate of a 2.4 percent gain, and topping a median market estimate for 2.7 percent growth.

"This is a pretty positive figure and shows the recovery is picking up pace," said Takeshi Minami, chief economist at Norinchukin Research Institute.

"Non-manufacturers are boosting spending on expectations that private consumption will recover, so this should serve as a key driver of growth," he said.

Capital spending rose 2.7 percent from the previous quarter, much more than a preliminary estimate of 0.4 percent growth and bigger than a 2.3 percent expansion projected in a Reuters poll.

Taking advantage of a weak yen, a number of Japanese manufacturers are shifting production back to Japan from China and elsewhere. Panasonic has pulled back some production of room air-conditioners and Canon has repatriated some output of high-end copiers.

Analysts say record profits and ample cash have finally started spurring firms such as industrial robot maker Fanuc Corp. to increase capital investment.

SERVICE-SECTOR INVESTMENT ON THE RISE

The data is welcome news for the government and the Bank of Japan, which are hoping that expectations of a steady economic recovery will spur companies and households to boost spending.

A pick-up in capital expenditure is key for the success of premier Shinzo Abe's stimulus policies, which aim to reflate the economy out of stagnation by changing companies' perception that deflation will persist.

"The Japanese economy is returning to growth orbit," Abe's spokesman Yasuhisa Kawamura told reporters on the sidelines of a summit of Group of Seven leaders on Sunday.

The upgrade reflected a Ministry of Finance survey issued last week, which showed corporate capital spending grew in January-March at the fastest pace in a year.

The MOF survey, which is used to calculate revised GDP data, showed a notable increase in non-manufacturers' spending.

Rapid expansion of online and mobile businesses is driving investment on distribution and inventory networks by retailers and wholesalers, while hotels and theme parks are renovating to draw in customers, including foreign tourists attracted by a weak yen.

"Non-manufacturers may also be investing more on automation to meet a shortage of labor," noted Norinchukin's Minami.

© 2017 Thomson/Reuters. All rights reserved.

 
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Japan's economy expanded much faster than initially expected over January to March as companies ramped up capital investment, underscoring the central bank's view that recovery from last year's recession is gaining momentum.
japan, economy, growth, investment
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2015-48-08
Monday, 08 Jun 2015 10:48 AM
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