A businessman rides an escalator outside a commercial building in Tokyo

Japan first-quarter GDP growth seen moderate, weak consumption a concern

By Tetsushi Kajimoto

TOKYO (Reuters) – Japan’s economy was expected to post a second straight quarter of moderate growth in January-March, led by a pickup in exports and business investment, a Reuters poll found, pointing if realized to a steady recovery from recession after last year’s sales tax hike.

Annual expansion of 1.5 percent in gross domestic product (GDP) would match the rate of growth in October-December, translating into a quarterly increase of 0.4 percent, unchanged from the prior quarter, the Reuters poll of 22 economists found.

Subdued growth could be a source of concern for policymakers counting on consumer spending, backed by increased corporate profits and higher wages, to help sustain a virtuous growth cycle and defeat nearly two decades of deflation.

“The economy shows no signs of accelerating due mainly to private consumption, which would rise only slowly,” said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

“The economy is slow-going despite expected (positive) effects from cheap oil prices. I’m particularly concerned about struggling private consumption.”

Private consumption, which accounts for roughly 60 percent of GDP, was expected to register a quarterly gain of 0.2 percent, slowing from a 0.5 percent rise in October-December.

Consumers tightened their purse strings as the sales tax hike boosted prices across the board, outpacing salaries and curbing real incomes, hurting household purchasing power.

Capital spending was seen to rise 0.8 percent, after sliding for three straight quarters through October-December as companies have been hesitant to boost spending on plant and equipment given the uncertain economic outlook.

External demand was seen as likely to shave 0.1 percent point off GDP growth. A weak yen helped boost exports, but imports outpaced exports, resulting in a slightly negative external contribution.

Ministry of Finance data due on May 13 at 0850 JST (May 12, 7.50 p.m. EDT), is expected to show the current account surplus rising to 2.0601 trillion yen ($17.18 billion) in March, exceeding 2 trillion yen for the first time since Sept 2010, helped by income gains and an improving trade balance.

On May 15, 0850 JST (May 14, 7.50 p.m. EDT) Bank of Japan data is expected to show wholesale prices fell 2.1 percent in the year to April, the first drop since March 2013, partly as effects of the sales tax hike taper off.

On the month, the corporate goods price index (CGPI), which measures the prices companies charge each other for their goods and services, was forecast to rise 0.1 percent, the poll found.

(Editing by Eric Meijer)


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