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Weak expenditure overshadows Japan's surprise first-quarter economic expansion of Reuters

© Reuters. FILE PHOTO: You are standing in front of the mall near the Bank of Japan building in Tokyo By Tetsushi Kajimoto and Playing Kihara TOKYO (Reuters) – Japan's economic growth accelerated unexpectedly in January-March and is driven by net exports from exports and defies the forecasts for a contraction in the world's third largest economy. However, the surprise expansion was mainly caused by the fact that imports fell faster than exports, which probably reflects the weak domestic demand, a concern for politicians with a planned sales tax scheduled to enter into force in October. The study of this challenge was private consumption and investment evaluations, both of which fell in the first quarter, while exports were hit by the biggest fall since 201 5. Japan's economy grew by 2.1% First quarter showed gross domestic product (GDP) data on Monday, market expectations fell by 0.2%. It followed a revised 1.6% expansion in October-December. The soft spots behind the GDP number may give speculation that Prime Minister Shinzo Abe may postpone a double-delayed increase in sales tax in October. All the major components of GDP are negative, says Hiroaki Muto, chief economist at Tokai Tokyo Research Center. "The economy has already reached the peak, so we are likely to get a mild recession," he said. "No one would oppose the delay in sales tax." The GDP expansion for the head was largely due to an import decline of 4.6%, the largest decline in a decade and more than an export…


© Reuters. FILE PHOTO: You are standing in front of the mall near the Bank of Japan building in Tokyo

By Tetsushi Kajimoto and Playing Kihara

TOKYO (Reuters) – Japan’s economic growth accelerated unexpectedly in January-March and is driven by net exports from exports and defies the forecasts for a contraction in the world’s third largest economy.

However, the surprise expansion was mainly caused by the fact that imports fell faster than exports, which probably reflects the weak domestic demand, a concern for politicians with a planned sales tax scheduled to enter into force in October.

The study of this challenge was private consumption and investment evaluations, both of which fell in the first quarter, while exports were hit by the biggest fall since 201

5.

Japan’s economy grew by 2.1% First quarter showed gross domestic product (GDP) data on Monday, market expectations fell by 0.2%. It followed a revised 1.6% expansion in October-December.

The soft spots behind the GDP number may give speculation that Prime Minister Shinzo Abe may postpone a double-delayed increase in sales tax in October.

All the major components of GDP are negative, says Hiroaki Muto, chief economist at Tokai Tokyo Research Center.

“The economy has already reached the peak, so we are likely to get a mild recession,” he said. “No one would oppose the delay in sales tax.”

The GDP expansion for the head was largely due to an import decline of 4.6%, the largest decline in a decade and more than an export case of 2.4%.

As imports fell more than exports, net imports – or transports minus imports – increased 0.4 percentage points to GDP growth.

Private consumption fell 0.1% and investments fell by 0.3%, which doubted policy makers’ belief that solid domestic demand will offset the pain from slowing exports.

There have been growing conversations from some former politicians to delay the sales tax in step with deteriorating domestic and external conditions.

However, Finance Minister Toshimitsu Motegi bravely sat down on Monday and said there was no change in the government’s plan to raise sales tax to 10% from 8% in October.

“There is no change in our view that the basic preconditions for domestic demand remain solid,” Motegi told reporters

But some analysts warn that Japan’s economy will continue to face headwinds that can dampen growth in coming quarter.

“Consumption spending is likely to remain weak, as wages do not rise so much,” said Kentaro Arita, senior economist at the Mizuho Research Institute.

“During the second quarter, GDP could be zero or slightly negative as exports will remain weak. This, combined with weaker capital expenditure means there is a risk of a recession.”

GDP data comes as the government’s coincident economic indicator flagged the possibility that Japan may be in a recession, as exports and factory production were hit by China’s slowdown and Chinese-American trade war.

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