Japan GDP seen recovering from recession at end-2014

Reuters/TokyoJapan’s economy was expected to rebound in the final quarter of last year from two consecutive contractions as private consumption overcame a sales tax shock and exports bounced back, a Reuters poll showed yesterday. Analysts expect economic growth data due on February 16 will confirm the economy had already hit bottom and was emerging from recession late last year after an unexpectedly severe reaction to April’s sales hike to 8% from 5%. “The pace of recovery in consumer spending picked up and exports expanded, so both domestic and external demand contributed to growth,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute. He expects the economy will keep its moderate recovery in January-March led by mainly domestic demand from consumer spending and companies’ capital expenditure. “Firms’ capital spending will likely improve gradually. Large Corps enjoy strong earnings thanks to a weak yen. If this spreads to small and medium-sized firms, capex overall will rise.” The economy is seen to have expanded an annualised 3.7% in October-December last year, according to the median forecast of 23 economists in the Reuters poll. The expected growth would follow a 1.9% annualised contraction in July-September and a 6.7% contraction in April-June, which was the sharpest fall since January-March, 2011. The annualised figure translates into a 0.9% growth from a 0.5% fall in the previous quarter, according to the poll. Private consumption, which makes up about 60% of the economy, is seen have grown 0.7% in the final quarter, following a 0.4% rise in the previous quarter. Capital expenditure is seen rising 1%, the first expansion in three quarters, from falls of 0.4% and 4.7% in the previous quarters. External demand is expected to add 0.3 percentage point to growth in the quarter, compared with 0.1 percentage point in July-September. The Cabinet Office will release the data on February16. Indicators due next week include key data such as machinery orders and the current account balance. Core machinery orders, a highly volatile data series regarded as an indicator of capital spending in the coming six to nine months, was seen rising 2.4% in December from the previous month, according to the poll. That compared with a 1.3% rise in November and a 6.4% drop in October. Compared with a year earlier, core orders is seen to have risen 5.9% in December, which would be the first increase in three months.A man works around a metal processing machine at a factory in Urayasu, east of Tokyo. Japan’s core machinery orders is seen rising 2.4% in December 2014.