Growth in Japan’s Economy

  • Gross domestic product during the first quarter expanded 1.7% on an annualized basis from the previous three months, according to government data released Wednesday.
  • Economists said the growth figure was pushed sharply higher by a downward revision to the previous quarter’s number and an extra leap year day in February that inflated the consumer spending result.
  • The economy was likely to stall again in the second quarter due to a slowdown in China, renewed strength in the yen and the impact of big earthquakes in southern Japan last month.
  • Months of weak economic data, including contractions in two of the previous three quarters, had fueled expectations that Mr. Abe would put together a big fiscal stimulus package and hold off on a sales-tax increase planned for 2017. A similar tax rise in 2014 was blamed for pushing the economy into recession and consumer spending has yet to fully recover.
  • Local media have reported that Mr. Abe has already decided to delay the tax increase, but Mr. Abe and other senior government officials have denied that.
  • Economists at SMBC Nikko Securities said the currency’s gains pose a further risk to business sentiment. “We await a response in fiscal and monetary policy,” they said in a note.
  • The yen’s gains during the first quarter have heightened expectations that the Bank of Japan will undertake additional monetary easing in an effort to weaken the currency and stoke inflation.
  • Koichi Hamada, a Yale University emeritus professor and adviser to Mr. Abe, said Japan could face a strong backlash from the U.S. if it tries to weaken the yen through intervention.

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