Date
19 November 2017
Private consumption fell more than 5 percent in the second quarter of last year and has yet to recover. Photo: Bloomberg
Private consumption fell more than 5 percent in the second quarter of last year and has yet to recover. Photo: Bloomberg

Japan exits from recession, but growth lacks momentum

Japan’s economy emerged from recession in the fourth quarter of 2014, but its overall growth for the year was zero.

According to data released on Monday, the economy grew at an annualized pace of just 2.2 percent in the final quarter, well below analyst forecasts. Quarter-on-quarter growth was 0.6 percent against expectations of 0.9 percent.

The figures suggest Japan’s economy is back on track but still struggling for momentum even after two years of Abenomics, the Financial Times said.

It is still not generating enough growth in domestic demand, which is needed for a permanent end to deflation or for the government to be able to tackle its budget deficit, according to the newspaper.

“The preliminary gross domestic product release for the fourth quarter confirms the economy is past the worst,” Yasunari Ueno, chief market economist at Mizuho Securities in Tokyo, was quoted as saying. “But it’s not easy to be optimistic about the path of growth from here.”

The Nikkei 225 Index touched an eight-year high and closed up 0.5 percent.

Economic growth was driven by private consumption, which climbed 0.3 percent on the previous quarter, contributing 0.2 percentage point to growth; and exports, which grew 2.7 percent on the back of a weaker yen.

Imports also rose by 1.3 percent, but net trade as a whole contributed only 0.2 percentage point to total growth.

The government of Prime Minister Shinzo Abe is implementing an unprecedented stimulus program, known as Abenomics, in a bid to revive the economy after two decades of slump.

But growth sputtered after Abe raised consumption tax from 5 to 8 percent last April as part of an effort to tackle Japan’s huge budget deficit.

The economy shrank in the second and third quarters of 2014. Private consumption fell more than 5 percent in the second quarter of last year and has yet to recover, the report said.

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RA/CG

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