TOKYO (AP) — Japan's economy grew slower-than-forecast in the last quarter of 2013, clouding the outlook for recovery ahead of a sales tax hike in April.
Government figures released Monday showed the world's third-largest economy expanded 1 percent on annualized basis in the October-December quarter. From the prior July-September quarter, gross domestic product grew 0.3 percent. That matched growth in struggling Europe but was less than half of some forecasts despite a boom in housing construction and stronger public and private spending.
Slower growth in China and other major markets has taken a toll on exports, sapping growth at a critical time for Prime Minister Shinzo Abe's recovery strategy. "The export environment is not improving as much as expected," the economy minister, Akira Amari, told reporters.
Still he said the recovery remained steady, supported by consumer demand. Japan's consumer price index rose 0.4 percent in 2013, the first increase in five years. The economy grew an estimated 1.6 percent in 2013, according to preliminary data from the Cabinet Office, just slightly faster than the 1.4 percent expansion in 2012.
Since the economy emerged from recession in late 2012 it has expanded four quarters in a row, supported by a combination of strong government spending and aggressive monetary easing. The Bank of Japan's monthly monetary policy meeting began Monday. The central bank was expected to keep monetary policy unchanged, while promising more action if necessary to cushion the blow to consumer and corporate demand from a 3 percent sales tax hike that takes effect April 1.
Many economists expect the central bank to stand pat for now as price increases and growth continue, though at a slower pace than desired. "To be sure, we expect further policy easing later this year, but not on a Q4 GDP trigger," Mizuho Bank said in a commentary Monday.
The government has already promised 5.5 trillion yen ($54.2 billion) in fresh stimulus. Private residential spending rose nearly 18 percent from a year earlier in October-December and 9 percent for the year. Economists expect the tax hike to cause the economy to contract in April-June after expanding in this quarter, as consumers move up purchases to beat the tax hike and then tighten their belts afterward to compensate for higher costs.
A telephone survey by the Mainichi newspaper showed 65 percent of respondents plan to cut spending after the tax hike. Other recent data have been mixed. Corporate demand for bank loans has risen moderately, climbing 2.1 percent increase in 2013 from the year before, compared with an average annual decline of 1.5 percent in 2000-2012.
But so far, companies appear to be focusing much of their investment on overseas markets. Machinery orders, a major trend setter for corporate spending, fell 3.1 percent month-on-month in December, with core private sector orders dropping 15.2 percent, the biggest plunge since the government began its current data series in 2005.
"The sharp fall in machinery orders in December casts doubt on whether the fledgling recovery in business investment will continue," said Capital Economics economist Marcel Thieliant. "Overall investment is set to weaken in coming months as housing construction will likely fall sharply after the consumption tax hike in April."