Japan posted a bumper set of growth figures in the first quarter of the year to beat analysts’ expectations and avoid dipping into recession.
The economy grew 0.4 per cent in the first quarter – 1.7 per cent on an annualised basis – bouncing back from a 0.4 per cent contraction in the final three months of last year.
The growth rate smashed expectations for an annualised increase of just 0.2 per cent, as commentators said the return to growth will cast doubt over prime minister Shinzo Abe’s long-awaited plans to raise consumption tax, as he may not wish to rock the boat.
“An increase in exports and personal consumption were key contributors for growth during the first quarter of this year. Growth was, however, limited by a decrease in capacity investment, as companies felt the brunt of a strong yen and concerns of a world economic slowdown,” said Katsunori Kitakura of Sumi Trust, Japan’s largest trust bank.
Further fiscal stimulus from the Bank of Japan (BoJ) is also still on the table, after it disappointed markets in its most recent meeting after not cutting interest rates or hiking its quantitative easing programme (QE).
Analysts said they expected the BoJ to roll out at least a modest boost to its ¥80 trillion (£500bn) a year QE programme when it meets in July.