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Fourth-quarter GDP cut to 0.7%

Kyodo

The nation’s economic growth was slower than initially estimated in the fourth quarter of calendar 2013, the government said in a revision Monday, adding to concern the economy may retreat at a faster pace after the April 1 consumption tax hike.

The world’s third-largest economy expanded by an annualized 0.7 percent in price-adjusted terms in the three months through December, downgraded from the initial estimate of 1.0 percent, due to weaker growth in capital spending and private consumption, the Cabinet Office said.

The October-December expansion in real gross domestic product, the total value of goods and services produced at home, translated into a 0.2 percent increase from the previous quarter.

Although GDP grew for the fifth quarter in a row, the latest figure fell short of the market’s forecast average of an annualized 1.0 percent rise, sparking concerns the economy may fail to return to a growth path after the 3-point consumption tax hike to 8 percent next month.

Corporate capital spending, which Prime Minister Shinzo Abe’s Cabinet views as one of the keys to shoring up the economy, rose 0.8 percent from the previous quarter but was downgraded from the 1.3 percent rise reported in the preliminary data released Feb. 17.

Private consumption, which accounts for roughly 60 percent of GDP, was also downwardly revised to a 0.4 percent increase from 0.5 percent, as sales of nondurable goods, including winter clothing and food, were weaker than expected, a Cabinet Office official said.

Abe has vowed to prevent the tax hike from hurting the economy by securing a ¥5.5 trillion economic stimulus package and ¥1 trillion in tax cuts aimed at boosting investment and encouraging firms to raise wages.

The government-affiliated Japan Center for Economic Research said last week that Japan’s GDP is projected to contract by as much as an annualized 4.1 percent in the April-June quarter, citing an average calculated from the projections of 41 private-sector economists.

In the January-March quarter, the center expects the economy to grow 4.6 percent due to an expected rush in demand to beat the tax hike.

In the Cabinet Office’s revised report for the October-December quarter, exports grew 0.4 percent and imports rose 3.5 percent, both unchanged from the initial data. Public investment climbed 2.1 percent on the back of massive fiscal spending — one of the main steps in Abe’s “Abenomics” policy mix along with vows of structural reform — but was downgraded from the initially reported 2.3 percent growth.

In calendar 2013, the economy grew a real 1.5 percent, compared with the preliminary figure of 1.6 percent.

Koya Miyamae, senior economist at SMBC Nikko Securities Inc., said in a report that the results for the October-December quarter are seen as “somewhat feeble,” given that spending is starting to increase ahead of the sales tax hike.