Japan economy expands at 2.2 percent annual pace in Jan-Mar

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Private consumption, which accounts for roughly 60 per cent of gross domestic product (GDP), increased 0.4 per cent in the first quarter, matching market forecasts and posting its fifth straight quarter of increases.

Data out yesterday showed GDP rose at an annual rate of 2.2% in the three months to March, according to the country's Cabinet Office, marking five quarters of continuous output growth. "The global economy is solid and there aren't many domestic downside risks", said Norio Miyagawa, senior economist at Mizuho securities.

Offshore demand, or exports minus imports, added 0.1 percentage point to growth, a sign that improvements in overseas economies underpinned Japan's recovery.

Japan has been struggling to conquer years of deflation and slow growth that followed the bursting of an equity and property market bubble in the nineties.

The central bank has gone to extreme lengths to juice up the economy, buying huge amounts of Japanese government bonds and taking a key interest rate into negative territory.

Consumption has been a persistent weakness for Japan in recent years (especially after the two big rises in the country's sales tax) and the pick-up will encourage the Bank of Japan and the government that the highly stimulatory policies since 2013-14 are at last starting to have a sustained impact.

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But despite all those efforts, the economy still faces difficulties.

"Japan's economy is on its longest streak of expansion in more than a decade", Marcel Thieliant of Capital Economics said in a commentary.

She noted that much of the improvement was export-driven, but it wasn't clear whether that would continue, particularly as demand for autos in the US appeared to be dropping.

Many Japanese companies have been benefiting from the yen's declines against the dollar in the months since President Trump's election victory.

Exporters have been helped by the recent dip in the yen against the U.S. dollar.

But if the dollar's recent slide continues, Japanese firms could lose that advantage, returning to the difficulties they faced for much of past year.

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