Here’s the good news: Japan’s economy is posting strong growth. But the bad news? Economists are warning there’s slower expansion ahead for Asia’s second-largest economy.
Gross domestic product grew by an annualized 2.4% in the three months ended March, Japan’s Cabinet Office said Monday. The figures were better than what most experts were expecting, and stronger than last quarter’s growth.
Markets in Tokyo even climbed 0.9% Wednesday on the news.
But the party won’t last long: Economists are saying a strong first quarter likely points to a lackluster second quarter this year, and are forecasting a ho-hum year overall.
“Looking ahead, a range of indicators point to a slowdown in the second quarter,” wrote Marcel Theliant of Capital Economics in a research note. “We therefore stick to our forecast that Japan’s GDP growth will be close to zero this year.”
Japan was in recession until last quarter, precipitated by a sales tax hike that took a huge bite out of consumer spending.
With the economy stuck in neutral, it’s perhaps not enough to tame critics of “Abenomics,” the economic plan championed by Prime Minister Shinzo Abe. The strategy — a massive bond-buying campaign coupled with structural reforms and stimulus from the central government — has largely failed to lift wages, or dramatically boost growth.
Abe, who has staked his reputation on economic progress, won re-election in snap elections held in December.
He also received some surprise support in late October when the Bank of Japan announced it would expand its already aggressive stimulus plan.
While today’s numbers may delay the need for immediate action by the central bank, “more stimulus will be needed before too long,” Theliant wrote.
