Japan Q4 growth seen quickening on shopping spree before tax hike

FE Team | Published: February 14, 2014 00:00:00 | Updated: November 30, 2026 06:01:00

TOKYO, Feb 13 (Reuters): Japan's economic growth is expected to have quickened at the end of last year as consumers ramped up spending ahead of a planned sales tax hike, but analysts say that Tokyo may have to inject fresh stimulus to brighten the outlook.
Lukewarm exports and wages growth have undercut some of the economic gains of the past year, and recent turmoil in emerging markets have also raised worries that Japanese shipments may fail to pick up the pace.
The median from a Reuters poll of 26 economists forecast Japan's economy to have grown 0.7 per cent in the October-December quarter from the previous three months.
That would be faster than a 0.3 per cent expansion June-September and mark the fifth consecutive quarter of growth. The median translates into an annualised increase of 2.8 per cent. The Cabinet Office will release the data on Monday. "What's driving growth is rush demand before the tax hike and capex gains," said Hiroshi Shiraishi, senior economist at BNP Paribas Securities.
"The rebound in consumption after the tax hike could be subdued as wage growth remains fairly subdued. The government may have to pursue some form of stimulus."
The Reuters survey found that Japan's economy picked up momentum in October-December as consumers rushed to buy cars, houses and durable goods to avoid paying more after an increase in the sales tax scheduled for April. Encouragingly, capital expenditure is also expected to have risen at the fastest pace in two years as companies divert some of their rising profits to investment on assembly lines and equipment.
Prime Minister Shinzo Abe's aggressive drive to jolt the world's third-biggest economy from a decades-long slumber has combined massive fiscal and monetary expansion, triggering an euphoric rise in stocks and a steep fall in the yen. His policies, dubbed Abenomics, have helped Japan's economy speed past many of its Group of seven counterparts last year.
Growth could accelerate further in January-March, but some economists are cautious because wages may not be strong enough to support spending after the tax hike. The relatively weak exports could also become a bigger headwind to growth.
Japanese stocks have also pulled back recently after booming over 50 per cent last year, partly hurt by global growth concerns.
The government will increase the sales tax in April to 8 per cent from 5 per cent, which is expected to encourage even greater spending in the current quarter.
In January new car sales hit the highest in 17 years, up for the fifth consecutive month as consumers purchased big-ticket items before the tax hike. Housing starts have also accelerated from October last year.