Japan's economy
grew much less than initially thought in the fourth quarter as capital
expenditure declined in a worrying sign that a rebound in consumer
spending is not encouraging business investment.
The revised fourth
quarter data joins a mixed batch of indicators over recent months that
underscore a fragile recovery from a recession, which analysts say could
pressure the Bank of Japan to inject fresh stimulus later this year to meet its inflation goal and beat back years of falling prices.
The economy grew an annualized 1.5 percent in October-December, Cabinet Office data showed Monday, down from a preliminary reading of an annualized 2.2 percent expansion and below the median estimate for 2.2 percent growth.
"One reason for the disappointing capex is the shift in production overseas that has been happening for the past few years," said Norio Miyagawa, senior economist at Mizuho Securities.
"I still expect the economy to continue to grow, but the virtuous economic cycle that policymakers have been talking about really hasn't fallen into place yet."
In response to worries about the pace of economic growth and in an indication of the BOJ's readiness to defend its inflation target, deputy governor Hiroshi Nakaso said on Monday that further monetary easing is likely if oil price falls hamper its efforts to ramp up inflation expectations.
On a quarter-on-quarter basis, the economy grew 0.4 percent in the fourth quarter, compared with a preliminary reading of 0.6 percent increase and expectations of 0.6 percent.
Fourth quarter GDP growth was mainly undermined by weak business investment and inventories.
Capital expenditure fell 0.1 percent from the previous quarter, less than a preliminary 0.1 percent increase and less than the median estimate for a 0.3 percent expansion.
The immediate outlook for capex may not look rosy either, as a Reuters poll forecast machinery orders to have fallen 4.1 percent in January from the previous month, after having risen 8.3 percent in December, the fastest pace in six months.
Consumer spending, which is crucial to achieving policymakers' aim of spurring sustainable economic growth, rose 0.5 percent, more than a preliminary 0.3 percent increase.
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| People walk on a street at Tokyo's Ginza shopping district. |
The economy grew an annualized 1.5 percent in October-December, Cabinet Office data showed Monday, down from a preliminary reading of an annualized 2.2 percent expansion and below the median estimate for 2.2 percent growth.
"One reason for the disappointing capex is the shift in production overseas that has been happening for the past few years," said Norio Miyagawa, senior economist at Mizuho Securities.
"I still expect the economy to continue to grow, but the virtuous economic cycle that policymakers have been talking about really hasn't fallen into place yet."
In response to worries about the pace of economic growth and in an indication of the BOJ's readiness to defend its inflation target, deputy governor Hiroshi Nakaso said on Monday that further monetary easing is likely if oil price falls hamper its efforts to ramp up inflation expectations.
On a quarter-on-quarter basis, the economy grew 0.4 percent in the fourth quarter, compared with a preliminary reading of 0.6 percent increase and expectations of 0.6 percent.
Fourth quarter GDP growth was mainly undermined by weak business investment and inventories.
Capital expenditure fell 0.1 percent from the previous quarter, less than a preliminary 0.1 percent increase and less than the median estimate for a 0.3 percent expansion.
The immediate outlook for capex may not look rosy either, as a Reuters poll forecast machinery orders to have fallen 4.1 percent in January from the previous month, after having risen 8.3 percent in December, the fastest pace in six months.
Consumer spending, which is crucial to achieving policymakers' aim of spurring sustainable economic growth, rose 0.5 percent, more than a preliminary 0.3 percent increase.
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