Japan: Japanese economy expands most in one year
May 16, 2013
Data for the first quarter showed that the stimulus measures introduced by Prime Minister Shinzo Abe - dubbed Abenomics -, flanked by aggressive monetary easing by the newly-inaugurated Central Bank Governor Haruhiko Kuroda, are bearing fruit. In the first quarter, GDP jumped 3.5% over the previous quarter in seasonally adjusted annualized terms (saar), which represents the second consecutive increase in the country's output and marks the strongest expansion in one year. The print represented an improvement over the revised 1.0% rise seen in the previous quarter (previously reported: +0.2% quarter-on-quarter saar) and overshot market expectations that had GDP expanding 2.7%. On an annual basis, however, economic activity expanded a mild 0.2% in the first quarter (Q4 2012: +0.5% year-on-year).
The improvement seen in the first quarter was mainly due to stronger consumption and a rebound in exports. Private consumption expanded 3.7% in the first quarter (Q4: +1.8% qoq saar), whereas public spending decelerated to a 2.3% increase (Q4: +3.0% qoq saar). Moreover, private non-residential investment fell 2.6%, which was less than half the 5.9% drop observed in Q4.
The external sector improved markedly, with exports of goods and services rebounding to a 16.1% increase over the previous quarter in annualized terms (Q4: -11.3% qoq saar). Meanwhile, imports expanded 4.0% (Q4: -8.5% qoq saar). As a result, the external sector's annualized net contribution to overall growth switched from minus 0.6 percentage points in the fourth quarter to plus 2.1 percentage points in the first.
The Bank of Japan expects the economy to expand between 2.4% and 3.0% in the fiscal year ending in March 2014. In the following fiscal year, the BoJ sees GDP growing between 1.0% and 1.5%. FocusEconomics Consensus Forecast panellists see GDP expanding 1.2% in 2013, which is up 0.1 percentage points from last month's projection. In 2014, the panel sees the economy growing 1.4%.