Japan Q4 GDP growth revised up, driven by capex gains

Japan's economy expanded more than initially estimated due to an upward revision of capital expenditure and inventory data.
Japan's economy expanded more than initially estimated due to an upward revision of capital expenditure and inventory data. PHOTO: AFP

TOKYO (REUTERS) - Japan's economy expanded more than initially estimated in October-December due to an upward revision of capital expenditure and inventory data, confirming an eighth consecutive quarter of growth.

The economy grew an annualised 1.6 per cent in October-December, versus economists' median estimate for 0.9 per cent annualised growth and the preliminary reading of a 0.5 per cent expansion, Cabinet Office data showed on Thursday (March 8).

It marked the longest uninterrupted expansion since a 12-quarter run of growth between April-June 1986 and January-March 1989 during Japan's asset-inflated bubble economy, a good omen for sustainable growth.

The annualised growth rate translates into quarter-on-quarter expansion of 0.4 per cent in real, price-adjusted terms, against an initial reading of a 0.1 per cent growth and the median estimate for 0.2 per cent growth.

The upward revision was due to faster-than-expected gains in capital expenditure, a boost for policymakers keen to stoke a virtuous growth cycle in which higher wages stimulate consumer spending, which will in turn boost business investment and accelerate inflation.

"Recent weak data such as industrial output and retail sales for January suggest GDP growth may slow in the first quarter,"said Masaki Kuwahara, senior economist at Nomura Securities.

"Still, Japan's growth will hold firm at least until summer, led by exports and capital expenditure, with help from the solid US economy." With inflation remaining distant from the 2 per cent target, the Bank of Japan is widely expected to keep its massive monetary easing intact at its policy-setting meeting that ends on Friday.

Data out last week showed core consumer inflation in Tokyo accelerating to 0.9 per cent in February, as the jobless rate hit a 25-year low of 2.4 per cent in January, supporting the central bank's optimistic outlook.

BOJ Governor Haruhiko Kuroda, who is set to serve another term, rattled markets last Friday by flagging for the first time the prospect of an exit from monetary stimulus if his 2 per cent inflation target were met - a remark he later tempered.

Thursday's data showed the capital expenditure component of GDP grew 1.0 per cent from the previous quarter, versus the median forecast for 1.2 per cent growth, and the preliminary 0.7 per cent gain.

Private inventories contributed 0.1 percentage point to the overall GDP growth, versus the preliminary estimate of minus 0.1 percentage point, making them the biggest factor behind the upward GDP revision, a Cabinet Office official said.

Private consumption, which accounts for some 60 per cent of gross domestic product (GDP) grew 0.5 per cent in October-December from the previous three months, unchanged from the preliminary reading.

Domestic demand contributed 0.4 percentage points to revised GDP, while net exports - or exports minus imports - were balanced, making no contribution, the data showed.