Japan's economy grows at slower pace in Q4, misses expectations
Credit: Reuters/Toru Hanai
Pedestrians cross a street in Tokyo's Ginza shopping district May 16, 2013.
The 0.3 percent expansion in the October-December quarter was well below the median estimate for a 0.7 percent increase and followed 0.3 percent growth in July-September, data showed on Monday.
It was the fourth successive quarter of growth, which is the best run for the world's third-largest economy in more than three years.
However, signs that growth stalled at the end of last year could worry policymakers who are attempting to spark a sustainable recovery through an unprecedented fiscal and monetary expansion campaign launched in 2013.
Economists still expect that growth will accelerate in the current quarter as shoppers buy more goods before the tax hike scheduled in April, but lingering concerns about weak exports could weigh on the outlook.
'I am not so concerned about domestic demand given a buying rush ahead of a sales tax hike in April will play out more strongly in the current quarter,' said Taro Saito, senior economist at NLI Research Institute.
'What's more worrying is sluggish exports despite long-expected impact of a weak yen on boosting external demand.'
Export growth has remained sluggish over recent quarters, partly reflecting softer demand in Asian markets though some of it also underlined the shift by Japanese companies of their manufacturing plants to offshore centers.
On an annualized basis, Japan's economy grew 1.0 percent, also less than the median estimate for a 2.8 percent rise and 3.2 percent annualized growth in the United States in the same quarter, the Cabinet Office data showed.
Capital expenditure, a weak link in Japan's rebound so far, rose 1.3 percent in October-December. This marked the quickest growth in two years but was still less than the median forecast for a 1.9 percent gain.
The data adds to recent signs of slackening momentum in the economy, including from a closely-watched leading indicator of capital expenditure that suggests companies could turn more cautious this year due to worries about consumer spending.
In the fourth quarter private consumption, which makes up about 60 percent of the economy, grew 0.5 percent from the third quarter.
That was less that the median estimate for 0.7 percent in October-December, suggesting that a spurt in demand ahead of the sales tax hike is not as strong as anticipated.
The government will increase the sales tax in April to 8 percent from 5 percent, and consumers have been buying cars, homes and durable goods before the tax increase.
External demand subtracted 0.5 percentage point from growth, versus the median estimate for a 0.4 percentage point subtraction. The negative contribution is due partly to Japan's expanding domestic demand, which is boosting imports.
However, some economists worry that net exports could subtract from growth this year as companies continue to look for low-cost centers outside of Japan to produce their goods, which means they ship less from Japan.
Recent turmoil in emerging markets, have also raised concerns about an external shock harming shipments.
BOJ Governor Haruhiko Kuroda has dismissed the need for additional monetary easing as consumer prices are headed toward its 2 percent inflation target and as overseas economies recover.
At its policy review on Tuesday, the BOJ is widely expected to maintain its commitment of increasing base money at an annual pace of 60-70 trillion yen ($585-$683 billion) -- the world's biggest money-printer after the U.S. Federal Reserve started to trim back its own stimulus program since January.
(Editing by Shri Navaratnam)
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