Japan's economy again outshines US, euro zone

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TOKYO, June 11 (Reuters): Japan's economy outperformed both the United States and the euro zone in January-March for the second straight quarter, reinforcing expectations the Bank of Japan (BoJ) will raise rates in August.
The economy expanded by 0.8 per cent in January-March from the previous quarter, revised up from an initial reading of 0.6 per cent on robust growth in capital spending. The headline figure matched economists' forecasts, although consumption was revised down slightly from the initial reading.
On an annualised basis, gross domestic product (GDP) grew 3.3 per cent, up from a preliminary reading of a 2.4 per cent rise, the government said Monday. That was slightly higher than a consensus forecast for a revision to 3.1 per cent.
"Overall, the data confirmed the firmness of capital spending," said Takumi Tsunoda, a senior economist at Shinkin Central Bank Research.
Financial markets reacted little as the figures were mostly in line with forecasts. Still, the upbeat data makes it more likely the BoJ will further raise interest rates, analysts said.
Japan's January-March GDP growth compared with 0.6 per cent quarter-on-quarter growth in the euro zone and an annualised 0.6 per cent expansion in the United States.
Largely behind the upward revision was strength in capital spending, which was marked up to a 0.3 per cent rise from a preliminary 0.9 per cent fall.
While that was smaller than the consensus forecast of a revision to a 0.5 per cent rise, it was enough to confirm the economy continues to get support from corporate sector strength.
"When the preliminary data showed a fall in capital spending, people had worried about the outlook for capital spending," said Yoshiki Shinke, a senior economist at Dai-ichi Life Research Institute.
"But this data confirmed that capital spending remained firm," he said.
The economy expanded 2.1 per cent in the fiscal year that ended on March 31, slower than 2.4 per cent growth in the previous year but above the government forecast of 1.9 per cent.
The government expects Japan to achieve growth of 2.0 per cent in the fiscal year that began on April 1, and a senior official at the cabinet office gave an upbeat assessment.
"As a whole, the economy continues to recover," Jun Hamano, vice minister for policy coordination, told a news conference.
He said growth in capital spending is also moving within government expectations, which is for spending to keep growing but at a slower pace than in the year that ended on March 31.
Vice Finance Minister Hideto Fujii said the data was in line with the ministry's assessment that Japan's economy is continuing a long-lasting recovery and is not in deflation.