Japan 8217 s revised Q1 growth beats expectations

Japan's Cabinet Office has revealed that the economy grew 3.9 per cent in the first quarter of the year.

It expanded one per cent in the first three months of 2015 from the previous three, up from an initial estimate of 0.6 per cent, thanks to a jump in business spending. A weakening yen over the past months has been giving a boost to the country's big exporters.

Better-than-expected inventory levels contributed to the increase in capital spending, with some electronics manufacturers building up stockpiled items in anticipation of the release of new smartphones in the fall, the Wall Street Journal reports.

The data has fuelled hopes for a steady recovery for the world's third largest economy.

Abenomics

The revised growth data comes after a preliminary reading of 2.4 per cent. In the initial estimate, business spending was up just 0.4 per cent from the previous quarter. The revised reading was 2.7 per cent higher, compared to forecasts of 2.3 per cent.

However, many analysts expect growth in the second quarter to slow down as consumer spending slows and industrial output wanes.

Marcel Thieliant, economist at Capital Economics, told the BBC: "Core consumer spending fell to the lowest level since last summer in April, and industrial output may well contract this quarter. We therefore expect a sharp slowdown in GDP growth in the second quarter."

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.

But the pickup in the pace of recovery offers encouragement for Prime Minister Shinzo Abe, after facing criticism over his “Abenomics”, which combines aggressive monetary expansion, fiscal stimulus and structural reforms designed to revive the economy and end years of stagnation.