Japan first-quarter GDP growth seen moderate, weak consumption a concern

Sun May 10, 2015 7:41pm EDT
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By Tetsushi Kajimoto

TOKYO (Reuters) - Japan's economy was expected to post a second straight quarter of moderate growth in January-March, led by a pickup in exports and business investment, a Reuters poll found, pointing if realized to a steady recovery from recession after last year's sales tax hike.

Annual expansion of 1.5 percent in gross domestic product (GDP) would match the rate of growth in October-December, translating into a quarterly increase of 0.4 percent, unchanged from the prior quarter, the Reuters poll of 22 economists found.

Subdued growth could be a source of concern for policymakers counting on consumer spending, backed by increased corporate profits and higher wages, to help sustain a virtuous growth cycle and defeat nearly two decades of deflation.

"The economy shows no signs of accelerating due mainly to private consumption, which would rise only slowly," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"The economy is slow-going despite expected (positive) effects from cheap oil prices. I'm particularly concerned about struggling private consumption."

Private consumption, which accounts for roughly 60 percent of GDP, was expected to register a quarterly gain of 0.2 percent, slowing from a 0.5 percent rise in October-December.

Consumers tightened their purse strings as the sales tax hike boosted prices across the board, outpacing salaries and curbing real incomes, hurting household purchasing power.

Capital spending was seen to rise 0.8 percent, after sliding for three straight quarters through October-December as companies have been hesitant to boost spending on plant and equipment given the uncertain economic outlook.   Continued...

A businessman rides an escalator outside a commercial building in Tokyo March 26, 2015.  REUTERS/Toru Hanai