Japan economy grows at 4 percent annual pace in April-June

By ELAINE KURTENBACHEconomic IndicatorsAssociated Press

Japan's economy grew at a hearty 4.0 percent annual pace in the April-June quarter, helped by stronger consumer spending and corporate capital investment.

Economists had been forecasting a relatively strong performance for the world's third-largest economy, though the actual numbers were better than expected.

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The last quarter's growth was the sixth straight quarter of expansion and the fastest since the first quarter of 2015. The economy expanded at a revised 1.5 percent annual pace in January-March.

On a quarterly basis, the economy grew at a 1.0 percent pace, up from 0.4 percent in the previous quarter.

The data released Monday are preliminary and likely to be revised.

Industrial output is forecast to slow in the current quarter, but will remain robust enough to keep the economy growing at a fast clip, said Marcel Thieliant of Capital Economics.

"We therefore expect GDP to rise for the seventh consecutive quarter in Q3, which would mark the longest expansion since the turn of the century," he said in a research note.

The upbeat news failed to boost Japan's Nikkei 225 stock index, however, which fell 0.8 percent as the Japanese yen gained against the U.S. dollar. The yen has strengthened in recent days as tensions over North Korea's nuclear program have risen.

The figures are bound to be welcome news for Prime Minister Shinzo Abe, who has been faulted for a lack of progress on promised structural reforms needed to improve Japan's competitiveness and underpin growth in a country whose shrinking population is rapidly aging.

The uptick in growth in April-June was led by a 5.3 percent year-on-year increase in private demand, as families bought cars and appliances. Private residential spending grew 6.0 percent and corporate spending on factories and equipment jumped 9.9 percent, as companies compensated for labor shortages by investing in more automation, the Cabinet Office reported.

Real wages grew at a 0.7 percent pace, the report said.

The economy also was helped by a robust increase in public spending, as earlier announced stimulus measures took effect.

Abe took office in late 2012 vowing to revive growth and end a long spell of deflation, or falling prices, and push inflation higher by pumping trillions of yen (tens of billions of dollars) into the economy. The strategy has supported growth, so far, but has failed to reignite the inflation Abe said was needed to create a "virtuous cycle" to sustain a long-term recovery.

To avoid derailing that progress, Abe has twice pushed back a sales tax increase that eventually, if it is implemented in 2019 as promised, is expected to quash growth for a time.


This story has been corrected to show annual GDP growth in January-March was a revised 1.5 percent.