Japan's real gross domestic product grew at its fastest pace in a year at 2.4 percent in the first quarter of 2015, marking the second successive quarterly expansion, supported by a pickup in exports and housing investment, the government said on Wednesday.
According to the latest government figures, the expansion in the January-March quarter on an inflation-adjusted basis translates to a 0.6 percent increase from the previous quarter, with the expansion coming in ahead of median economists' expectations.
The first quarterly figures for this year come on the heels of a revised 1.1 percent expansion in the previous quarter and are in line with the central bank's view that the world's third largest economy is on a recovery path as corporations begin to invest again on recovering profits, which in turn have been passed on to workers in the form of increased salaries.
"This GDP report confirms the economy is picking up. This is supportive for the Bank of Japan (BOJ) as it has expected a moderate recovery. The central bank will reinforce its view that there is no need to ease now," said Masamichi Adachi, an economist at JPMorgan Chase & Co.
A boost in salaries has been directly responsible to households releasing the purse strings and spending again less frugally, economists also noted, having spent a while towing an extremely prudent line following last April's 3 percent tax hike, which severely impacted lower income earning households.
The lingering effects of the unpopular sales tax hike are evidenced by Wednesday's data revealing that the rate of GDP expansion adjusted for inflation in Q1 was, in fact, slower than a year before and at around the same level as in Q2 of 2013.
Some economists noted that while the expansion outpaced economists' expectations for a 1.5 percent increase in the recording period, the growth rate was aided by inventory as, while improving by stages, corporate investments are still not at a level that will allow the Bank of Japan (BOJ) to completely take its foot of the gas.
To this end, not all economist were as upbeat as Adachi, with some highlighting the possibility of further monetary easing, as the bank has delayed the timeframe it set to reach its 2 percent inflation target, owing to the global oil glut and falling prices.
Economics Minister Akira Amari, reinforced this point in not so many words but conceded that more reflationary effort was needed by the government and the BOJ. He told a news conference after the data was released that capital expenditure still remained shaky as companies' profits, while reasonably solid, are not back to levels where businesses are going to spend extemporaneously.
He was referring to the fact that capital investment gained just 0.4 percent from the previous three months and although rising for the first time in four quarters, the outlook for businesses, as suggested by recent economic indicators remains somewhat hazy.
"In terms of sentiment, Japan hasn't emerged from deflation yet, " Amari added.
Private consumption, which accounts for around 60 percent of Japan's GDP and is its biggest component, was a major factor in the quarterly increase, with the figure adding 0.4 percent and matching gains made in the previous quarter, owing to relatively brisk sales of domestic electronic appliances, but on the back of a 0.4 percent gain in the previous quarter, increased at a rate likely far slower than hoped for by both the government and the central bank./.