Keiko Ujikane Tokyo
JAPAN’S economy expanded less than economists estimated in the fourth quarter, underlining the difficulty in stoking growth while export gains are undermined by weak investment and consumption at home.
Gross domestic product (GDP) grew at an annualised 2.2 percent, less than a median forecast for a 3.7 percent increase. Nominal GDP, which is unadjusted for price changes, climbed an annualised 4.5 percent from the previous quarter.
The softness of the rebound shows Prime Minister Shinzo Abe’s challenge to revive the world’s third-largest economy from two decades of stagnation. Wage rises and increased consumer spending are likely to be pivotal this year to spur activity beyond exports, where the lower yen has contributed to surging profits at companies like Toyota.
“Japan has clawed its way out of recession but we are looking for a modest acceleration in growth,” Izumi Devalier, an economist at HSBC in Hong Kong said.
“This is not the picture of an economy that has a lot of spark behind it.”
The yen has weakened about 28 percent against the dollar since Abe took power in December 2012 with a pledge to revive the economy with his Abenomics reflation policies. While the lower Japanese currency helped boost exporters’ earnings, it also increased import costs and bruised consumer sentiment.
The economy shrank 6.7 percent in the three months after Abe increased the sales tax in April, and dropped 2.3 percent in the third quarter, according to yesterday’s revised data. Taken for 2014 as a whole, GDP came to a standstill after two years of expansion, reflecting the blow from the tax hike as the government tries to contain the world’s heaviest debt burden.
The yen advanced 0.2 percent to ¥118.57 (R11.62) versus the dollar yesterday morning. The Topix share index rose 0.9 percent, after US equities climbed to a record last week. – Bloomberg