Japan’s unexpected GDP growth comes with reasons for caution

By: |
May 20, 2019 7:35 AM

Japan’s economy surprised with solid growth during the first quarter of the year, but that is likely to give little comfort to policy makers worried about economic momentum ahead of a looming sales tax increase.

Another reason for caution is that the figures released Monday offer a preliminary reading of Japan’s economy, and they are often significantly different when revised results are released in the following weeks. (Reuters File photo)Another reason for caution is that the figures released Monday offer a preliminary reading of Japan’s economy, and they are often significantly different when revised results are released in the following weeks. (Reuters File photo)

Japan’s economy surprised with solid growth during the first quarter of the year, but that is likely to give little comfort to policy makers worried about economic momentum ahead of a looming sales tax increase.

The biggest driver of the expansion was imports falling even faster than exports, meaning that net exports technically drove growth in the economy. Yet falling imports is actually a sign of underlying weakness in demand, so the result is somewhat misleading.

Another reason for caution is that the figures released Monday offer a preliminary reading of Japan’s economy, and they are often significantly different when revised results are released in the following weeks.

Gross domestic product expanded an annualized 2.1% in the three months through March, according to a Cabinet Office report. That compares with economists’ median estimate for a contraction of 0.2%.

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