Japan’s economy has grown at an annual rate of 2.1 percent for the first three months according to data released by Japan’s Cabinet Office.
Japan’s economy has shrugged off forecasts by beating expectations, this quarter. The growth is surprising, as there is still weakness in the economy. However, some data are still intriguing and casts a shadow on economic growth.
Exports and private consumption have fallen, while imports have shown a steeper decline than exports.
The economic slowdown in China was expected to be reflected in the growth of Japan’s economy. The trade war has put a break in the growth of the Chinese economy. All countries that have industries associated with China have felt the slow growth affecting their business. Earnings forecast have slid in almost all these industries.
The growth by 2.1 percent in the GDP has beaten estimates in Japan, as the economy was expected to contract by 0.2 percent. This increase is said to be caused by imports sliding more than the exports.
Imports have fallen by 4.6 percent, while exports have dropped by 2.4 percent.
The sales tax increase which was expected in Japan from policymakers from 8 to 10 percent is expected to be delayed.
However, Economy Minister Toshimitsu Motegi says that the fundaments behind the economy are strong with strong GDP growth and the high sales tax will come into play as per expectations in October.
Prime Minister Shinzo Abe had put off the sales tax hike in late 2014. At that time, the GDP data had slowed down by 1.5 percent.
Capital investment and household spending are still poor. This shows that the internal demand this quarter is still sluggish. These factors have to be considered, says economist Hiroyasu Ando at Sumitomo Mitsui Banking.
The growth for the second and third quarters is expected to grow still further, due to the fiscal stimulus.