Japan’s economy grows annualised 2.4% in first quarter

<p>The country’s GDP growth is fastest in a year.</p>

Japan's economy grew faster than forecast during the first quarter of the year, fuelling hopes that the economy is recovering from last year's recession.

Real gross domestic product grew by an annualised 2.4 per cent between January and March, the Government said today (May 20th), up from 1.1 per cent the previous quarter and beating a 1.5 per cent growth forecast by economists surveyed by The Wall Street Journal.

While analysts said the first quarter growth rate was very positive, Capital Economics analyst Marcel Thieliant said in a note that the acceleration in economic growth for the period was mostly due to a jump in inventories and a plunging oil price. After stripping out inventories, the annualised pace of expansion was just 0.4 per cent, The Financial Times reports. 

Many challenges remain

He added that a range of indicators point to a slowdown in the second quarter. "Industrial production in March was four per cent below its January peak, and the drop in the manufacturing PMI (Purchasing Manager's Index) to a multi-month low in April suggests that conditions are unlikely to improve quickly," he said.

Japan's economy has been facing difficulties in recent years including stagnant wages, a decline in business investment, a fall in business spending and a drop in consumer spending due to a sales tax increase from five to eight per cent in April 2014.

Critics have been vocal about the failure of "Abenomics", which combines aggressive monetary expansion, fiscal stimulus and structural reforms designed to revive the economy and end years of stagnation. However, a weakening yen over the past months has been giving a boost to the country's big exporters.

Japan's better-than-expected economic growth lifted the Nikkei to a 15-year high today. The benchmark Nikkei 225 rose 0.9 per cent to 20,196.6, the highest closing level since April 14, 2000.

Join our live webinars for the latest analysis and trading ideas. Register now

GAIN Capital UK Limited (trading as “City Index”) is an execution-only service provider. This material, whether or not it states any opinions, is for general information purposes only and it does not take into account your personal circumstances or objectives. This material has been prepared using the thoughts and opinions of the author and these may change. However, City Index does not plan to provide further updates to any material once published and it is not under any obligation to keep this material up to date. This material is short term in nature and may only relate to facts and circumstances existing at a specific time or day. Nothing in this material is (or should be considered to be) financial, investment, legal, tax or other advice and no reliance should be placed on it.

No opinion given in this material constitutes a recommendation by City Index or the author that any particular investment, security, transaction or investment strategy is suitable for any specific person. The material has not been prepared in accordance with legal requirements designed to promote the independence of investment research. Although City Index is not specifically prevented from dealing before providing this material, City Index does not seek to take advantage of the material prior to its dissemination. This material is not intended for distribution to, or use by, any person in any country or jurisdiction where such distribution or use would be contrary to local law or regulation.

For further details see our full non-independent research disclaimer and quarterly summary.