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Published: Fri, May 19, 2017
Economy | By Melissa Porter

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Dai-Ichi Life's Shinke estimates first-quarter GDP growth was an annualized 2.3 percent, with forecasts ranging from 0.4 percent to 3.1 percent.

The country's economy has been helped by a rise in exports as well as a pick-up in consumption and investment for the Tokyo Olympics 2020.

That would be the best run since 2006, during Japan's last period of political stability under the leadership of then-Prime Minister Junichiro Koizumi.

Some of Japan's growth is being driven by factors beyond Prime Minister Abe's control: since Trump's election in November, for example, a weakening yen has helped make Japanese exports more competitive.

But consumer spending remains tepid and efforts to lift inflation have fallen flat despite years of aggressive monetary easing by Japan's central bank. Still, the real growth figures are trending in the right direction, and an uptick in Japan's perennially low consumer spending is a promising vote of confidence in the economy.

Mr Abe's grand plan to kick start the world's third largest economy, known as "Abenomics", was aimed at tackling almost two decades of stagnant growth and falling consumer prices. The annualised rate of growth was 2.2 per cent.

Japan on Thursday said first quarter GDP rose a more than expected 0.5 percent on quarter and 2.2 percent at an annual pace.

An improving global outlook with strong demand for Japanese smartphone parts, memory chips and construction machinery has been a positive sign. That was ahead of market forecasts for an increase of 1.7%, and followed an upwardly-revised December quarter figure of 1.4%.

Cash-rich firms have been stingy with pay hikes though, which hurts spending and acts like an anchor on the economy.

"Wages are still stagnating, despite sharp falls in unemployment", research house Capital Economics said in a commentary.

The Bank of Japan (BoJ), aiming to achieve two-percent inflation as a key part of Tokyo's growth bid, now expects to reach that goal by 2019 - four years later than planned.

The country has struggled for decades with sluggish growth and falling prices.

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