Japan's Economic Growth Trails Forecasts

Sunday, 16 Feb 2014 07:43 PM

 

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Japan’s economy grew less than economists forecast in the final quarter of last year, underscoring risks to the nation’s recovery as a sales-tax increase looms in April.

Gross domestic product expanded an annualized 1.0 percent from the previous quarter, the Cabinet Office said Monday in Tokyo. That compared with the 2.8 percent median estimate of economists surveyed by Bloomberg News, as analysts bet that consumer spending would climb ahead of the tax change.

While capital spending rose by the most in two years and consumer spending growth picked up, external demand dragged on the expansion. Recent declines in consumer confidence and limited gains in exports have highlighted the risk that Japan’s recovery under Abenomics could fade after the levy increase.

“There’s a high chance the economy will slump if domestic demand slows and exports are stagnant,” Taro Saito, director of economic research at NLI Research Institute in Tokyo, said before the release.

While the Japanese currency slid about 18 percent against the dollar last year, reaching a five-year low of 105.44 on Jan. 2, gains in export volumes were limited.

The fourth straight quarterly expansion in the economy follows annualized growth of 1.1 percent in the previous three months. Gross domestic product is forecast to contract in the April-June period, when the sales tax will rise to 8 percent from 5 percent.

© Copyright 2014 Bloomberg News. All rights reserved.

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