Strong growth posted by Japanese economy

Japan's economy grew by 1.5 per cent in the first three months of the year, beating expectations, according to the release of new official data.

The Asian nation revealed that between January and March, GDP was up by 1.5 per cent, which is significantly above the one per cent prediction many industry commentators had suggested.

One of the reasons behind the strong rise in the Japanese economy at the start of the year was a rush in consumer spending, prompted by the introduction of a new sales tax that came into force on April 1st.

"Japan's economy expanded rapidly ahead of the sales tax hike, but is set to slump thereafter," Marcel Thieliant, Japan economist at Capital Economics, told BBC News.

"Looking ahead, the economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge."

Spending up

Consumer spending was up by more than two per cent over the course of the quarter, perhaps indicating that the sales tax did have a pronounced impact on GDP between January and March.

Japanese prime minister Shinzo Abe has implemented a wide range of policies designed to boost the economic growth of the Asian nation, with many commentators dubbing his plan Abenomics.

Bill Adams, senior international economist for PNC Financial Services Group, predicted that the second quarter will now see a contraction in the Japanese economy as it shrinks back from the strong gain posted in the first three months of the year.

"Japan's imports continued to grow faster than exports in the first quarter, as they have in each of the preceding two quarters," he said.

"Abenomics has boosted Japanese import demand more than the weaker yen is boosting Japan's exports."

A weak yen is typically good news for major exporters that are based in Japan, with some of the country's biggest companies benefiting in the last 12 months as a result of the currency's value against global rivals such as the US dollar.

Learn about the Asian markets and CFD trading at City Index