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The economy expanded an annualized real 3.1 percent in the January-March period from the previous quarter, revised sharply upward from a 1.9 percent increase in the initial report on strong capital investment data, the government said Monday.

The growth, measured in terms of gross domestic product, corresponds to a 0.8 percent rise on a quarter-to-quarter basis, compared with the earlier reported 0.5 percent gain, the Cabinet Office said.

The result was almost in line with the average market projection.

With the latest data, the economy grew a real 3.2 percent in fiscal 2005 from the previous year, compared with a 3.0 percent increase in the preliminary report.

On a nominal basis, GDP grew 0.4 percent in the first quarter of this year from the previous three-month period, or an annualized rise of 1.6 percent, for the second consecutive quarterly rise. This represented an upward revision from a quarter-on-quarter increase of 0.049 percent in the preliminary report, or an annualized 0.2 percent rise.

“A basic structure that the Japanese economy is led by private demand with strong private consumption and capital investment has not changed,” an official at the Cabinet Office said.

The official added a jump in capital investment, which stems from fresh supply-side data, contributed most to push up the real GDP in the January-March quarter.

The official also said a government target of 1.9 percent growth in fiscal 2006 will be attained if the economy grows 0.2 percent on a quarter-to-quarter basis, or an annualized 0.9 percent, in the four quarters from the April-June period.

Private-sector economists welcomed the upward revision in the GDP, saying the fresh data reconfirmed the strength of the economy.

“Taking a jump in April machinery orders into account, capital investment is likely to continue to post high growth in the April-June period,” said Takahide Kiuchi, a senior economist at Nomura Securities Co.

Kiuchi said he expects the real GDP to mark higher growth in the April-June period than the January-March quarter.

He said the firm growth in the January-March quarter will help the Bank of Japan gain momentum to seek early interest hikes, but the possibility of ending the “zero-rate” policy in July has been declining amid unstable stock markets at home and abroad.

In the January-March period, capital investment climbed a real 3.1 percent from the previous quarter, revised upward from 1.4 percent growth in the initial report.

Personal spending, which accounts for about 55 percent of GDP, increased a real 0.5 percent, compared with the initially reported 0.4 percent growth.

Exports rose a real 2.7 percent, unchanged from the initial report, while imports increased 3.5 percent, revised upward from the initially reported 3.0 percent rise.

Housing investment gained a real 1.1 percent, unchanged from the initial report. Government spending slipped 0.6 percent, revised upward from the initially projected 3.5 percent fall.

The GDP deflator fell 1.2 percent from a year earlier.

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