Japan’s economy expanded more in the final quarter of 2016 than initially reported, due to an upward revision in business spending.
Gross domestic product grew 1.2 percent on an annualized basis from the previous quarter in the three months through December, according to data released by the Cabinet Office on Wednesday.
Measured quarter on quarter, GDP rose 0.3 percent from preliminary figure 0.2 percent. Business spending rose 2 percent against the preliminary figure of 0.9 percent.
For 2016, the Japanese economy grew 1.0 percent, unchanged from the initial estimate, after posting 1.2 percent growth the previous year, the Cabinet Office said.
Government stimulus measures and capital spending were key growth drivers.
A weak yen also helped prop up the economy by driving exports, but inflation and consumer spending remain weak as cautious firms avoid big pay hikes.
“Private non-residential investment was revised up significantly as we’d expected, and so overall there is little surprise” to the revised figures, said Taro Saito, senior economist at Tokyo’s NLI Research Institute.
“The Japanese economy is on track for moderate recovery and we expect (the Bank of Japan) will keep the current policy for the time being,” he added.
Japan’s economy contracted in the last three months of 2015, before bouncing back last year although the recovery has been wobbly.
Japan’s economy has expanded for four consecutive quarters, the longest run in more than three years. But the growth has been modest and mostly driven by exports, while private consumption at home remains soft. The yen’s decline following Donald Trump’s election is expected to support corporate profits, but economists are skeptical that companies will pass that along to workers via significant wage gains.
“Exports to Asia are picking up, restoring corporate confidence, and the IT cycle is recovering globally,” Akihiro Morishige, an economist at Mitsubishi Research Institute Inc., said before the report was released. “Also, the weak yen since Trump’s election is helping to improve sentiment.” Yet the rebound in business investment depends on a recovery in exports, and isn’t driven by domestic demand, Morishige said.
“Japan’s economy will likely stay in a gradual recovery trend, but it will largely depend on exports,” Morishige said. “Corporate profits are showing a clear sign of recovery, meaning companies have leeway to raise wages,” Atsushi Takeda, an economist at Itochu Corp. in Tokyo, said before the report was released.