Surprisingly strong data in January boosted hopes for an economic rebound after the economy barely emerged from a shallow recession with near nil growth in the three quarters to December.
Although figures so far for February, such as trade, have been less than stellar, most economists still expect growth to resume, albeit modestly, in the January-March quarter.
Growth should be positive in January-March in gross domestic product terms, said Taro Saito, senior economist at NLI Research, adding, However, I dont seen the underlying trend strengthening sharply.
Others said, however, that unlike recent bouts of stop-go growth, the risk of the economy falling off sharply was less likely.
Takehiro Sato, an economist at Morgan Stanley, said: What is different from previous times is that there is some upside to workers income and the structure is changing.
Despite the weak figures for February, we expect January-March consumption to turn positive quarter-on-quarter.
The February data onslaught this week begins on Tuesday with jobs and retail sales figures, followed by industrial output on Wednesday and ending with the highly anticipated Bank of Japans quarterly corporate sentiment survey, or tankan, on Friday.
Financial markets, however, may be disappointed if they are looking for evidence of a strong rebound.
Seasonal distortions are expected to skew the data to the downside in February, particularly for consumption-related figures.
The effect of a leap year in 2004 is expected to hamper year-on-year data, particularly for retail sales because February 29 last year was a Sunday. Thats a big shopping day so that really hurt, as evidenced by the department store sales data, said Morgan Stanleys Sato.
Nationwide department store sales fell 7% in February from a year earlier, industry data showed last week.
Also, the Lunar New Year, which has affected trade data, is in turn expected to dampen industrial production. Results of the March tankan survey may also be a bit weaker than markets anticipate, some economists said.