Japanese growth slows as sales tax hike looms

Japan's economy grew at a slower pace than initially thought in the last quarter of 2013, revised data showed today, underscoring concerns about the pace of recovery under by Prime Minister Shinzo Abe's policy blitz.

The fresh figures will turn the focus on to Bank of Japan policymakers as they start a two-day meeting, with speculation they could unveil further monetary easing measures to counter a possible slowdown from a sales tax rise next month.

There are fears the rate hike -- seen as crucial to bringing down Japan's massive national debt -- will hit consumer spending and in turn dent the country's nascent recovery.

The world's number-three economy expanded 0.2 per cent in the quarter to December and 1.5 per cent through 2013, the latest data showed. That compared with earlier results showing gross domestic product grew 0.3 per cent for the October-December period and 1.6 per cent in 2013.

However, the new figures still mark Japan's best annual performance in three years, as Abe's growth blitz of big spending and monetary easing -- dubbed Abenomics -- rippled through the economy. The economy grew 1.4 per cent in 2012 and contracted 0.5 per cent in 2011 owing to the March 11 quake-tsunami disaster and subsequent nuclear crisis.

"The recovery... Lost pace in the second half of the year," said London-based Capital Economics.

"Nonetheless, it would be premature to conclude that Abenomics has failed based on these figures alone.

"After all, private consumption and business investment were stalling before PM Abe's election, but have picked up speed since then. The problem instead lies on the external side."

A key reason for the downward revision was weak exports, as Japan's trade imbalance balloons on the back of surging energy bills, aggravated by the shutdown of its nuclear reactors in 2011 in response to the Fukushima crisis.

Atomic power once supplied about a third of the resource-poor nation's energy.

In separate data today, the deficit in the January current account -- Japan's broadest measure of trade with the rest of the world -- more than quadrupled to another record figure of 1.589 trillion yen (USD 15.4 billion).

The growing imbalance was driven by the soaring costs of imported energy -- made pricier by a weak yen -- and lacklustre growth in shipments of Japanese goods abroad.

Critics fear that the controversial tax rise to 8.0 percent from 5.0 per cent will curtail the budding recovery in an economy beset by years of falling prices, which curbed spending and business investment.

Post new comment

E-mail ID will not be published
CAPTCHA
This question is for testing whether you are a human visitor and to prevent automated spam submissions.

EDITORIAL OF THE DAY

  • Signalling good times, current account deficit is likely to grow from here on

    The current account deficit (CAD) numbers for April-June quarter declined sharply to 1.7 per cent of GDP.

FC NEWSLETTER

Stay informed on our latest news!

INTERVIEWS

GV Nageswara Rao

MD & CEO, IDBI Federal Life

Timothy Moe

Goldman Sachs

Chander Mohan Sethi

CMD, Reckitt Benckiser India

COLUMNIST

Arun Nigavekar

Disruptive innovation in education

The past two weeks had a fair share of interesting ...

Rajgopal Nidamboor

Regain the spirit of focused power

For aeons, the human race has been experimenting with a ...

Gautam Gupta

Manufacturing must keep workers’ welfare in mind

It may be early days yet, but the labour reforms ...

INTERVIEWS

William D. Green

Chairman & CEO, Accenture