Japanese economy heads towards best growth streak since 2006, raising hopes of rising prices

Oliver Gill
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Japan's economy has grown for its fifth straight quarter (Source: Getty)

Japan’s economy grew at a better than expected 2.2 per cent annualised rate in the first quarter, according to official figures released overnight.

The quarterly expansion by 0.5 per cent is the fastest for a year and was boosted by the country’s export sector and private consumption.

The figures will give Japanese policymakers hope prices will soon be on the rise. Economists say low inflation, below the government’s two per cent target, is hindering the economy.

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A median forecast expected Japanese economic growth to be 1.7 per cent in the first three months of 2017, according to Reuters. Most other individual estimates did not anticipate growth greater than two per cent.

The growth is the fastest since January to March 2016 and is the fifth straight quarter of growth. In the last quarter of 2016, growth was 1.2 per cent.

The last time Japan’s economy grew for six quarters was in 2006.

However, recent data has indicated a softening of corporate spending on factory equipment could have an adverse impact on growth for the rest of the year.

Marcel Thielant of Capital Economics told Associated Press: "Japan’s economy is on its longest streak of expansion in more than a decade... However, we expect a slowdown in the second half of the year."

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The government is determined to re-inflate prices in Japan. It is pumping trillions of yen into the economy through asset purchases.

Consumer prices are stagnating as wage growth is being suppressed by the tendency for companies to hire more part-time or temporary workers at lower wages to save on costs.

"I think the economic recovery will eventually push up wages and prices, but the pace will be slow," Norio Miyagawa, a senior economist at Mizuho securities, told Reuters.

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