TOKYO (AP) — Japan raised its estimate for economic growth in the January-March quarter as investment by companies was stronger than first thought.
The government said Monday that the economy grew an annualized 6.7 percent in the quarter. The initial growth estimate was 5.9 percent. From the previous quarter, the economy expanded 1.6 percent. Japan's economy, the world's third largest, is expected to contract in the current quarter due to a sales tax hike on April 1 that has sapped some momentum from consumer spending.
Preliminary data show demand slowing in April. A corresponding decline in imports helped push the current account back into surplus in April for the first time in four months, the Finance Ministry reported Monday. The month's surplus was 131 billion yen ($1.3 billion) compared with a current account deficit of 782.9 billion yen ($7.6 billion) in March.
Retail sales and corporate spending both surged ahead of the 3 percentage point tax hike as families and businesses stepped up purchases to avoid paying the higher rate. The revised GDP data show private non-residential investment rose 7.6 percent in the first quarter from a year earlier, up from the original estimate of a 4.9 percent increase.
The higher growth estimate for the first quarter suggests corporate investment may be picking up and could help cushion the impact of the tax hike on the economy. But growth estimates can vary widely, and the data reported Monday may change again, London-based Capital Economics said in a commentary.
"Revisions between the first and second estimate have historically not brought the data closer to final outcomes," it said. The government is planning to cut corporate taxes to further encourage investment that it says will lead eventually to higher wages, ending a two-decade slump following the collapse of Japan's "bubble economy" in the early 1990s.
Sustained growth will require a recovery in purchasing power through increased wages that would help make up for the higher costs households face due to inflation and higher taxes, economists say. So far, most companies are raising bonuses rather than base wages, which have continued to fall and dipped 0.2 percent in April from a year earlier.