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Japan fourth-quarter GDP growth revised up, BOJ seen in no rush to exit easy policy

Reuters  |  TOKYO 

By Kajimoto

TOKYO (Reuters) - Japan's economy expanded more than initially estimated in the last quarter of 2017, thanks to an upward revision of capital expenditure and inventory data, confirming the longest run of growth in 28 years.

Global demand for has driven an investment boom in many of the country's high-end sectors, such as autos, and precision machinery, mirroring trends seen in other major Asian exporting nations.

However, despite the solid growth -- the eighth consecutive quarter of expansion -- analysts say the of is unlikely to bring forward a debate on exit from monetary stimulus given the sluggish wages that have prevented consumer spending and inflation from accelerating.

BOJ Haruhiko Kuroda, who is set to serve another term, rattled markets last Friday by flagging for the first time the prospect of an exit from monetary stimulus if 2 percent inflation were met in fiscal 2019 - a remark he later tempered.

"It will take longer to achieve the 2 percent target. There's no change to this perception after the GDP data that merely confirmed remains on track for stable growth led by global economy's expansion," said Yoshimasa Maruyama, at

"Inflation holds the key to a debate on exit, but it won't accelerate as long as wages and private consumption lack momentum even as capital spending rises. In that sense, the focus will be the upcoming annual wage talks, rather than data."

The economy grew an annualised 1.6 percent in October-December, versus economists' median estimate for 0.9 percent annualised growth and the preliminary reading of a 0.5 percent expansion, data showed on Thursday.

The annualised growth rate translates into quarter-on-quarter expansion of 0.4 percent in real, price-adjusted terms, against an initial reading of a 0.1 percent growth and the median estimate for 0.2 percent growth.

There was no significant market reaction during Asian trade to the stronger-than-expected data.

The upward revision was due to faster-than-expected gains in capital expenditure, thanks to investment in information and communications such as and and

Private inventory was the biggest contributor to the upward GDP revision due to rising stock of and natural gas, steel products, and devices, a said.


Policymakers are keen to stoke a virtuous growth cycle in which higher wages stimulate consumer spending, in turn boosting business investment and accelerating inflation.

However, the central also admits that it is difficult to shake the deflationary mindset that has been entrenched in consumers and companies during 15 years of falling prices.

Sales fell a second straight month in February at after it raised prices of its grilled chicken skewers for the first time in almost 30 years last October - a move that alienated customers and hurt its stock price.

Fast had a rush of customers nationwide last month when it offered free vouchers for its signature beef bowl dish priced at 380 yen ($3.58) - long a symbol of the deflationary economy - causing traffic jams surrounding its restaurants.

Underscoring fragile consumer spending, service-sector confidence worsened in February for a third straight month to a 10-month low, according to government survey dubbed "economy watchers" for their proximity to consumer and

With inflation remaining distant from the 2 percent target, the central is widely expected to keep its massive monetary easing intact at its policy-setting meeting that ends on Friday.

Thursday's data showed the capital expenditure component of GDP grew 1.0 percent from the previous quarter, versus the median forecast for 1.2 percent growth, and the preliminary 0.7 percent gain.

Private inventories contributed 0.1 percentage point to the overall GDP growth, versus the preliminary estimate of minus 0.1 percentage point.

Private consumption, which accounts for some 60 percent of (GDP) grew 0.5 percent in October-December from the previous three months, unchanged from the preliminary reading.

Domestic demand contributed 0.4 percentage points to revised GDP, while net exports - or exports minus imports - were balanced, making no contribution, the data showed.

"Recent weak data such as industrial output and for January suggest GDP growth may slow in the first quarter," said Masaki Kuwahara, at

($1 = 106.0600 yen)

(Additional reporting by Daiki Iga; Editing by Eric Meijer and Sam Holmes)

(Only the headline and picture of this report may have been reworked by the Business Standard staff; the rest of the content is auto-generated from a syndicated feed.)

First Published: Thu, March 08 2018. 11:19 IST