Japan's GDP Extends Run of Gains as Exports Support Growth

Japan has posted its longest economic expansion in over a decade, government data showed Thursday, marking a win for Tokyo's growth bid even though its battle to conquer deflation is still far from won.

GDP to have increased 1.7 percent in the three months through March, on an annualized basis, from the previous quarter.

It marked the fifth straight quarter of expansion, the longest growth run since a six-quarter streak through 2006, when the Bank of Japan was exiting from its previous quantitative easing programme on signs of strength in the economy.

TOKYO (Reuters) - Japan's economy expanded at the fastest pace in a year in the first quarter, government data showed on Thursday, heightening prospects of a steady recovery driven by robust global demand.

Whether or not increases in consumer prices take hold won't be known until much later in 2017, with a lot riding on expectations for higher energy costs and hopes for higher wages, which would encourage household spending and allow retailers to charge more for their wares. "But the economy passed the grade both in terms of the pace of growth and the quality of the expansion".

In the quarter the economy grew by 0.5 per cent.

The yen's recent depreciation against the dollar amid hopes for a stronger US economy apparently helped Japanese exporters as a weak yen tends to make their products competitive and boost overseas profits when repatriated.

But consumer prices are barely rising as firms remain wary of increasing wages, keeping the BOJ under pressure to maintain its massive stimulus despite improvements in the economy.

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.

Despite healthy profits, many Japanese firms remain cautious about the world economy, partly due to worries that US President Donald Trump's protectionist leanings could hurt exports.

The latest numbers confirm that "the Japanese economy remains on solid footing", Naohiko Baba, chief Japan economist at Goldman Sachs, said in a research note.

"I think the economic recovery will eventually push up wages and prices, but the pace will be slow".

  • Eleanor Harrison