Japan: Economy climbs on consumption and exports in first quarter
May 17, 2012
The Japanese economy expanded strongly in the first quarter on the back of resilient private consumption, rising government spending directed towards rebuilding the areas damaged by the Tohoku earthquake and improving exports, which recovered from the supply chain disruptions stemming from the flooding in Thailand. In the first quarter, GDP jumped 4.1% over the previous quarter in seasonally adjusted annualised terms. The strong result followed the revised 0.1% rise recorded in the fourth quarter 2011 (previously reported: -0.7% quarter-on-quarter saar) and overshot the 3.5% increase expected by the market. On an annual basis, economic activity expanded 2.7% over the same quarter last year (Q4 2011: -0.5% year-on-year), after contracting in the previous four quarters. Domestic demand was shored up by strong private consumption (Q4 2011: +2.8% qoq saar; Q1 2012: +4.4% qoq saar) and public spending (Q4 2011: +1.6% qoq saar; Q1 2012: +2.8% qoq saar). On the other hand, private non-residential investment plummeted sharply (Q4 2011: +22.3% qoq saar; Q1 2012: -14.8% qoq saar). That said, economic growth benefited from a lower destocking process. The external sector improved markedly in the first quarter as well, with exports of goods and services jumping a healthy 12.3% over the previous quarter in annualised terms, contrasting the 14.1% drop observed in Q4 2011. On the other hand, imports expanded 8.0% (Q4 2011: +3.8% qoq saar) due to rising fuel purchases necessary to boost electricity generation. As a result, the external sector's annualised net contribution to overall growth swung from minus 2.9 percentage points in the fourth quarter to plus 0.5 percentage points in the first. The Bank of Japan expects economic activity to expand between 2.1% and 2.4% in the fiscal year ending in March 2013 before moderating to a range of between 1.6% and 1.8% in the following fiscal year.