Business / Economy

GDP grew at much faster annual rate of 1.6% in October-December quarter

Kyodo

The economy grew at a much faster than initially reported annualized rate of 1.6 percent in the October-December period, thanks to robust corporate spending freshly signaling strengthening domestic demand, the government said Thursday.

The upward revision from the 0.5 percent increase confirmed Japan has posted eight straight quarters of growth, its longest run in 28 years.

Still, growth slowed from the July-September period when the economy registered a 2.4 percent annualized gain.

The expansion in gross domestic product — the total value of goods and services produced at home — corresponded to a 0.4 percent increase from the previous quarter, revised up from 0.1 percent in a preliminary report.

The latest growth streak is the longest since Japan had 12 straight quarters of growth between April 1986 and March 1989 during the asset-inflated bubble economy.

Japan’s economy has benefited from robust exports as the global economy continues to expand, while spending by both companies and consumers has been recovering.

Capital spending rose a revised 1.0 percent in the October-December period, up from 0.7 percent in preliminary data released on Feb. 14. It marked the fifth consecutive quarter of gain as companies stepped up investment in semiconductor-related equipment and automation to cope with labor shortages.

Private consumption, accounting for nearly 60 percent of the GDP, grew 0.5 percent, unchanged from preliminary data by the Cabinet Office.

“The GDP figure came out stronger than expected as capital spending and inventory were revised up. It’s true that capital expenditure has been recovering but my impression is that the pace is rather modest,” said Toru Suehiro, senior market economist at Mizuho Securities Co.

The Cabinet Office revised the contribution of private inventories to economic growth from negative to positive. An inventory build-up is regarded as a plus in GDP.

Public investment was revised to a 0.2 percent drop compared with the 0.5 percent fall reported earlier.

Prime Minister Shinzo Abe is stepping up calls for companies hoarding cash to raise pay and boost investment. Bank of Japan Gov. Haruhiko Kuroda, for his part, has said growth in wages and prices is “inextricably linked,” as the central bank faces a tough battle to achieve its 2 percent inflation target.

Going forward, the economy is expected to remain on a recovery track, even as economists say there is uncertainty over the impact of poor weather conditions on consumption.

“Higher fresh food prices are likely to have weighed on private consumption (in January-March) and the yen’s rise (against the dollar) could become negative for corporate earnings and business investment,” Suehiro added.

Fears of a trade war could dampen Japan’s prospects going forward, following U.S. President Donald Trump’s threat to slap stiff tariffs on steel and aluminum imports as well as the departure of his economic adviser Gary Cohn, an advocate of free trade.

Unadjusted for price changes, the economy grew an annualized 1.1 percent, a turnaround from a 0.1 percent contraction.

Japan’s real GDP growth rate for 2017 was revised up to 1.7 percent from 1.6 percent.