The economy returned to growth in the fourth quarter, the Cabinet Office announced Friday, bolstering Prime Minister Shinzo Abe’s campaign to end 15 years of deflation and jump-start economic growth.
Gross domestic product rose an annualized 0.2 percent in the three months through December, compared with a preliminary calculation of a 0.4 percent contraction, the Cabinet Office said. The figure growth matched the median estimate in a Bloomberg News survey of 24 economists.
In a separate release, the Finance Ministry said Japan’s current account deficit in January stood at ¥364.8 billion.
Private consumption and public investment fueled the growth, while a less than initially estimated fall in capital spending suggests the weakening yen may be easing corporate pessimism. Exporters ranging from Toyota Motor Corp. to Nintendo Co. raised their profit projections as the currency’s near 16 percent slump against the dollar since mid-November boosts the value of overseas sales.
“Japan’s recession is over and the economy is heading to recovery,” said Koya Miyamae, an economist at SMBC Nikko Securities Inc. who had predicted Friday’s GDP data. “I expect the pace of growth to pick up in coming quarters backed by government spending, improving corporate profits and the global (economic) recovery.”
The yen has fallen to almost a 3½-year low against the dollar, as investors expect an improving labor market in the United States will compel the U.S. Federal Reserve to slow stimulus even as Abe’s government is pledging to extend monetary easing policies. The Japanese currency was at ¥93.96 to the greenback at 5:00 p.m. in Tokyo trading Friday.
The 0.2 percent growth in the fourth quarter may create a tailwind for Haruhiko Kuroda, the Abe administration’s nominee as the next Bank of Japan governor, who is promising more aggressive easing to revive the world’s third-largest economy.
“It’s a good time to be BOJ governor because Kuroda can say Japan is making progress toward ending deflation when he adds more stimulus,” said Miyamae of SMBC.
Capital spending fell 1.5 percent from the previous quarter, less than a preliminary estimate for a 2.6 percent decline, Friday’s data also showed. Private consumption rose 0.5 percent, marginally higher than an initial projection of a 0.4 percent increase, while public investment was revised upward to a 1.8 percent gain from an initially estimated 1.5 percent rise.
The economy will grow by an annualized 2 percent in the current quarter after the Diet last month passed a ¥13.1 trillion supplementary budget to stimulate growth, according to the median estimate of Bloombergs’ survey of economists.