This article is from the source 'independent' and was first published or seen
on .
It last changed over 40 days ago and won't be checked again for changes.
Japan's growth disappoints casting doubt on 'abenomics'
Japan's growth disappoints casting doubt on 'abenomics'
(about 7 hours later)
Japan's economy grew slower than expected in the last quarter of 2013, casting doubt over Prime Minister Shinzo Abe's recovery plans.
Japan suffered a setback today as the world’s third-biggest economy slowed sharply at the end of last year — putting pressure on its central bank to pump billions more into recovery efforts.
The world's third-largest economy expanded just 1 per cent on annualized basis in the October-December quarter, compared to earlier estimates of a 2.8 per cent expansion.
Quarterly growth of 0.3 per cent between October and December was well below expectations of a 0.7% increase despite a fourth successive quarter of growth for its economy. Economists expect growth to pick up again in the present quarter as shoppers rush to beat an April VAT hike.
In the prior July-September quarter, gross domestic product grew 0.3 per cent. That matched growth in struggling Europe but was less than half of some forecasts despite a boom in housing construction and stronger public and private spending.
But further disappointments could put the heat on prime minister Shinzo Abe and the Bank of Japan to act again after the shock and awe tactics to jumpstart Japan out of its economic malaise last year.
Slower growth in China and other major markets has taken a toll on exports, sapping growth at a critical time for Prime Minister Shinzo Abe's recovery strategy, which has been dubbed 'Abenomics'.
Japan’s trade position has weakened dramatically despite a falling yen as the nation is now much more reliant on energy imports after the 2011 tsunami which shut down its nuclear capacity. Slower growth in China and other major markets meanwhile has taken a toll on exports, sapping growth at a critical time for Abe’s recovery strategy.
"The export environment is not improving as much as expected," the economy minister, Akira Amari, told reporters.
ING Bank economist Rob Carnell said: “The arguments for the BoJ to provide a further dollop of yen weakness through some pre-emptive expansion of QE looks to be gathering strength.”
But he said the recovery remained steady, supported by consumer demand. Japan's consumer price index rose 0.4 per cent in 2013, the first increase in five years.
The economy grew an estimated 1.6 per cent in 2013, according to preliminary data from the Cabinet Office, just slightly faster than the 1.4 per cent expansion in 2012.
Since the economy emerged from recession in late 2012 it has expanded four quarters in a row, supported by a combination of strong government spending and aggressive monetary easing.
The Bank of Japan's monthly monetary policy meeting begins today. The central bank is expected to keep monetary policy unchanged, while promising more action if necessary to cushion the blow to consumer and corporate demand from a 3 per cent sales tax hike that takes effect April 1.
The government has already promised 5.5 trillion yen ($54.2 billion) in fresh stimulus.
Private residential spending rose nearly 18 per cent from a year earlier in October-December and 9 per cent for the year.
Economists expect the tax hike to cause the economy to contract in April-June after expanding in this quarter, as consumers move up purchases to beat the tax hike and then tighten their belts afterward to compensate for higher costs.
