Japan posts strong growth ahead of sales tax rise

Japan street crossing Japan is the world's third-largest economy, but has been grappling with deflation and stagnant growth

Related Stories

Japan's economy grew at the fastest pace in nearly three years in the first quarter due to increased spending ahead of a sales tax increase on 1 April.

Official data showed GDP rose 1.5% in the January-to-March period, against a revised 0.1% in the prior quarter.

The figure beat forecasts for 1% growth, and was led by consumer spending which rose by 2.1%.

Capital spending by businesses also outperformed, rising by 4.9%, which was more than double analyst expectations.

Private consumption accounts for about 60% of Japan's economy. However, economists warned that spending may taper off now that the April tax hike has been introduced.

"Japan's economy expanded rapidly ahead of the sales tax hike, but is set to slump thereafter," Marcel Thieliant, Japan economist at Capital Economics, said.

"Looking ahead, the economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge."

Trade deficit

Japanese Prime Minister Shinzo Abe has been trying to revive growth in the world's third-largest economy.

His policy of "Abenomics" has helped Japan's economy grow faster, but concerns remain about whether the recovery is durable.

Analysts warn that Japan's huge trade deficit could pose a risk to growth.

Data released on Monday showed that exports grew 6% quarter-on-quarter as a weaker yen made Japanese goods cheaper to overseas buyers.

However, the weaker currency has also made imports more expensive for Japan, which has continued to buy vast quantities of foreign fuel to compensate for its lack of nuclear power.

Bill Adams, senior international economist for PNC Financial Services Group, also expects an economic contraction in the second quarter.

"Japan's imports continued to grow faster than exports in the first quarter, as they have in each of the preceding two quarters," he said.

"Abenomics has boosted Japanese import demand more than the weaker yen is boosting Japan's exports."

More on This Story

Related Stories

More Business stories

RSS

BBC Business Live

  1.  
    TESCO PROFIT WARNING 07:10:

    "We now expect trading profit for 2014/15 to be in the range of £2.4bn to £2.5bn. Trading profit for the six months ending 23 August 2014 is expected to be in the region of £1.1bn."

     
  2.  
    TESCO PROFIT WARNING 07:08:

    Tesco has brought forward the start date for Philip Clarke's replacement David Lewis as boss. He now starts the job on Monday.

     
  3.  
    TESCO PROFIT WARNING 07:05: Breaking News

    Tesco says its profits will be lower than expected. Dividends to be cut. More shortly.

     
  4.  
    VIRGIN AUSTRALIA 06:49:
    Virgin planes

    Virgin Australia overnight announced losses of A$355.6m (£200.5m) for the year - more than three times its loss last time. It blamed "weak consumer sentiment" and too many planes - like its rival Qantas which reported its results yesterday.

     
  5.  
    CO-OP VOTE 06:35: BBC Radio 4

    Big changes to the structure of the deeply troubled Co-op group will be put to a ballot of members tomorrow. Phil Dorrell, of consultants Retail Remedy, tells Today that even if the changes go through, a new leadership will have lot of work to do. "This will be a large step-change. My one concern would be that it probably shouldn't be the final change for the Co-op, they should consolidate, make sure they get their businesses back on track, and then have another look at it in a couple of years time."

     
  6.  
    EUROZONE ECONOMY 06:22: Radio 5 live

    Wake Up to Money ponders whither the eurozone? This week France had to re-appoint its cabinet because of its failing economy. Italy re-entered recession earlier this month and even German GDP was down slightly in the latest quarter. Kathleen Brooks, from Forex.com tells the programme: "Some economies are falling at a faster rate than others but what we've really seen is the core economies Germany and France lagging behind Spain."

     
  7.  
    HOUSE PRICES 06:14:
    For Sale signs

    The gap between house sellers' asking prices and actual selling prices is widening, says the property website Hometrack. It explains that the market is cooling down, at least in terms of prices. It says sellers in England and Wales typically got 96% of their asking price in August, falling back for the third month in a row. But it adds house prices only tend to start falling when the percentage of the asking price that sellers achieve falls below 94%.

     
  8.  
    GOOGLE DRONE 06:03:
    Google drone

    Overnight, Google said it was developing drones to act as flying delivery vehicles. The company calls it Project Wing. But it said it would take many years to create a service with lots of drones making lots of deliveries every day. More here.

     
  9.  
    06:00: Rebecca Marston Business reporter, BBC News

    All of that. Stay with us - we're here 'til 13:00.

     
  10.  
    06:00: Ian Pollock Business reporter, BBC News

    Good morning, we are here again, to keep you informed, educated and possibly entertained.

     

Features

From BBC Capital

Programmes

  • A map of social media interactionsClick Watch

    Twitter's map of the Middle East conflict – how the two sides react to each other on social media

BBC © 2014 The BBC is not responsible for the content of external sites. Read more.

This page is best viewed in an up-to-date web browser with style sheets (CSS) enabled. While you will be able to view the content of this page in your current browser, you will not be able to get the full visual experience. Please consider upgrading your browser software or enabling style sheets (CSS) if you are able to do so.