Abenomics Pay as Japan’s Economy Accelerates Faster than Expected

Japan’s economy accelerated the most since 2011 in the first three months of the year as consumers rushed to take advantage of the sales tax hike while companies boosted their investments.

The gross domestic product in the first quarter expanded 5.9 percent from the previous quarter, reported the Cabinet Office. This exceeded the median estimate of a 4.2 percent growth in a Bloomberg poll of 32 economists.

Consumer spending grew 2.1 percent from the last quarter of 2013, the strongest since the first quarter of 1997, when it grew at 2.2 percent. Capital spending rose 4.9 percent, the highest growth rate since the first quarter of 2011, when it grew by 8.2 percent following the nuclear disaster and earthquake that rocked Japan.

The impressive data indicates the Bank of Japan may announce any monetary easing policies anytime soon. If the momentum is sustained, it could be a convincing factor for the government to increase the tax rate.

 “Maintaining capital spending growth will be a key factor in sustaining the recovery, “ Takuji Okubo, a Tokyo-based chief economist at Japan Macro Advisors, told Bloomberg. “The situation doesn’t warrant additional BOJ easing for now.”

Imports grew 6.3 percent from the preceding quarter, while exports increased 6 percent. The Japanese Economy Minister Akira Amari was pleased with the news, saying the surging demand just before the tax hike exceeded his expectations. Nonetheless, consumer sentiment in April after the sales tax hike plunged to nearly a 3-year low, indicating there are still hurdles ahead.

Beer deliveries last month plunged 21 percent from a year ago, the steepest decline since 2005, after earlier surging 17 percent in March. Consumer spending on goods such as computers and electronics increased in March, while auto sales grew in the seven months ending March before declining last month.

 

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