Japan Q1 growth accelerates on tax hike buying

FE Team | Published: May 16, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

TOKYO, May 15 (AFP): Japan's first-quarter growth was the strongest in over two years, data showed Thursday, as the nation's cash registers rang up big sales ahead of a consumption tax rise that threatens to stall activity in the coming months.
Millions of shoppers scooped up everything from cars and refrigerators to televisions and alcohol in a buying spree that drove the 1.5 per cent expansion in gross domestic product for the three months to March.
That beat market expectations and a tepid 0.1 per cent rise in the last quarter of 2013.
Japan's latest growth figures were the strongest since mid-2011, when the world's third-largest economy bounced back in the aftermath of a devastating quake-tsunami disaster.
But, as Tokyo works to conquer years of deflation, there are growing fears that shoppers will shun pricier goods due to the tax hike -- seen as key to chopping Japan's massive national debt.
That, in turn, would weigh on consumer spending and could derail a recovery in the wider economy.
"This is not normal and there will be a reaction to it," said Takeshi Minami, an economist at Norinchukin Research Institute, referring to quarterly growth, which amounted to a sizzling 5.9 per cent rise on an annualised basis.
"After this kind of rise, the fall back will not be small," he added.
Sales taxes rose to 8.0 percent from 5.0 per cent on April 1. Since then, Japanese auto sales dropped nearly 12 per cent in April from a year ago, beer shipments fell by about one-fifth, and department stores have seen a sharp drop-off in customer traffic, underscoring concerns about slower spending.
On Thursday afternoon, fresh figures showed a deterioration in consumer confidence last month that marked another worrying sign for the current quarter.
"The economy will certainly contract in the second quarter of the year, as consumers rein in spending after the tax hike, and residential investment is set to plunge," said Marcel Thieliant, a Japan economist for Capital Economics.
But "we remain confident that the recovery will resume in the second half of the year", he added.