The economy grew 0.6 percent in the January-March quarter for the ninth consecutive quarter of growth after corporate spending slowed, the Cabinet Office said in a preliminary report released Thursday.
Gross domestic product, the total value of goods and services produced in the country, grew at an annualized rate of 2.4 percent in the quarter, the government said.
The figure is about half of the revised 1.2 percent rise or 5.0 percent annualized gain for the October-December quarter.
However, it is close to the 0.7 percent average predicted growth by economists surveyed by the Nikkei business daily. Other market-forecast data showed similar numbers.
Personal consumption and exports remained strong, but corporate capital expenditures fell for the first time in five quarters, signalling that economic growth may be slowing, economists said.
Capital expenditure dropped 0.9 percent from the previous quarter, hurt by weak performance in the telecommunication equipment and automobile sectors. In the October-December quarter, it posted a 2.3 percent increase.
The data released Thursday shows that consumer spending, which accounts for more than half of the country’s GDP, rose 0.9 percent in the January-March period, after expanding 1.1 percent in the previous three months.
A governmental official said that warm weather during the period encouraged people to shop and eat out. The introduction of Microsoft’s Windows Vista operating system in January also had an impact as more people replaced their computers, the official said.
Exports also offset weak capital spending, posting a 3.3 percent growth, compared with 0.8 percent growth in the October-December period. Imports expanded 0.9 percent after falling 0.1 percent in the previous quarter.
The governmental official said that while exports to the United States slowed, they were offset by brisk demand from Asian countries. China overtook the U.S. as Japan’s biggest trading partner in 2006.
Economists said the economy could be affected by the slow expansion in the U.S. economy, which just grew at an annualized 1.3 percent in the January-March quarter, marking the slowest economic growth in four years.
Despite a growth in personal consumption in the reporting quarter, Economic and Fiscal Policy Minister Hiroko Ota said she was skeptical of strong personal consumption, citing stagnant wage growth.
“Due to flat wage growth, I don’t think personal consumption is very strong,” she told a news conference. “Escape from deflation is in sight but we need to watch closely to see if Japan will slide back to serious deflation.”
The GDP data shows that the GDP deflator, a broad measure of price changes, declined 0.2 percent in the quarter from the previous year, compared with a 0.5 percent fall in the October-December period, suggesting Japan is gradually moving out of deflation.
Thursday’s data highlights a continued economic expansion, but economists point to signs that economic growth will slow in the near future, citing reports published earlier this month.
Koichi Haji, chief economist at NLI Research Institute, predicted economic growth will slow down, citing the recent weak figure for machinery orders and very slow wage growth.
“Higher private consumption was probably caused by temporary factor. For example, the launch of Microsoft’s Vista encouraged people to replace their computers,” Haji said. “Wage growth is slowing. So weak consumption spending and declines in capital expenditure may lead overall Japanese economic growth to slow.”
Machinery orders fell 4.5 percent in March from the previous month, an indication that companies will cut spending over the next six months.
According to the health ministry, the figure for the nation’s average wage declined 0.4 percent in March from a year earlier, marking the fourth straight month of decline.
Japan had wanted to declare that deflation had officially ended in the last fiscal year, but did not. Lehman Brothers Japan Inc.’s chief economist, Kenichi Kawasaki, was not too optimistic about this year either.
“Japan will probably not declare the end of deflation in the current fiscal year, too, due to weak consumer prices (excluding volatile fresh food), oil costs and personnel costs,” Kawasaki said.
However, Finance Minister Koji Omi said there is no deflation in Japan.
“I have consistently said that deflation is over. Based on stable prices, Japanese economy is going well,” Omi said after the GDP data was released.
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