TOKYO (AP) – Japan’s economy grew more robustly than expected in the first quarter of this year, at a 1.7 percent annual pace, but economists expect the expansion to slow in the current quarter.
Solid consumer demand and higher government spending helped offset relatively weak business investment in January-March. But data since then have been discouraging, and a major earthquake in southern Japan last month likely will drag on growth in this quarter, economists said. From the previous quarter, the economy inched up 0.4 percent.
“Japan’s GDP figures are notoriously volatile, and with output flat compared to a year ago, there can be no doubt that the economy is not doing well,” Marcel Thieliant of Capital Economics said in a commentary. In the fourth quarter, gross domestic product contracted 0.4 percent.
The recent weak data have raised expectations that Prime Minister Shinzo Abe may put off a planned sales tax increase due in April 2017 to prevent further disruptions, given the faltering progress toward a sustained recovery.
The worry is that raising the sales tax to 10 percent from the current 8 percent – a move already postponed once due to the outsized negative impact of the last sales tax hike – could hurt revenues more than help if the economy falls back into recession.