GDP growth upgraded to annualized 4.7%

Kyodo

Economic growth in the first three months of the year was upwardly revised to an annualized 4.7 percent from a preliminary reported 4.1 percent, helped by a milder decline in corporate capital outlays and slightly stronger consumer spending, the government said Friday.

Representing the third straight quarter of expansion of Japan’s real gross domestic product, the latest figures underscore that domestic demand has propped up the economy as it recovers from the March 2011 earthquake and tsunami, an official of the Cabinet Office said.

The office sees no need to change its assessment that the economy is on the way to recovery at a moderate pace, but some economists are wary about the outlook toward the end of the year, when the effect of government policies that have been spurring consumer spending will likely taper off.

Economic and fiscal policy minister Motohisa Furukawa said a possible downturn in overseas economies and the yen’s rise on the back of the deepening eurozone debt crisis could be seen as risks to the export-reliant economy.

The growth in the January-March period corresponds to a 1.2 percent rise from the previous quarter, compared with the earlier reported 1.0 percent increase.

As for fiscal 2011, which ended in March, GDP was marginally revised to minus 0.00 from the preliminary minus 0.01 percent.

Corporate capital spending in the January-March quarter was revised upward to a 2.1 percent fall from a 3.9 percent decline, partly due to stronger figures related to construction machines, the official said.

Consumer spending, which makes up some 60 percent of the GDP, rose 1.2 percent, compared with a preliminary 1.1 percent gain, backed by the government’s reinstated subsidy program for purchases of environmentally friendly vehicles. The revision was linked to spending on clothes and accommodation services.

Public investment was downgraded to an increase of 3.8 percent from the earlier reported 5.4 percent, but the official said the rate of growth is high amid demand to rebuild areas hit by last year’s natural disasters in the Tohoku region.

Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute, forecast that GDP is likely to grow an annualized 1 to 2 percent in April-June and around 2 percent the following quarter, but he added that “questions remain in the sustainability of high growth” as policy effects could weaken, including from the end of eco-car subsidies.