* Japan Q4 GDP f’cast +0.7 pct vs +0.3 pct in Q3
* Consumer spending to grow as shoppers eye sales tax hike
* Net exports could weigh further on growth
* Japan battling to end 15 years of deflation
* The data will be released on Feb. 17
By Stanley White
TOKYO, Feb 12 (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 percent in the
October-December quarter from the previous three months.
That would be faster than a 0.3 percent expansion
June-September and mark the fifth consecutive quarter of growth.
The median translates into an annualised increase of 2.8
percent. 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 percent last year, partly hurt by global growth
concerns.
HEADWINDS
The government will increase the sales tax in April to 8
percent from 5 percent, 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.
Private consumption, which makes up about 60 percent of the
economy, was seen growing 0.7 percent in October-December,
according to the poll, faster than the 0.2 percent growth in the
previous quarter.
Capital expenditure, a weak link in Japan’s rebound so far,
is forecast to have risen 1.9 percent in the fourth quarter,
which would be the quickest growth in two years.
That would show business investment finished strongly last
year, but a closely-watched leading indicator of capital
expenditure suggests companies could turn more cautious this
year due to worries about consumer spending.
On Wednesday, machinery orders, a leading indicator of
capital spending, suffered a 15.7 percent slump in December,
stoking further doubts about the manufacturing sector’s
contribution to Japan’s economic revival.
External demand is expected have taken 0.4 percentage point
from growth over October-December, following a 0.5 percentage
point subtraction in the previous quarter, the poll showed.
The negative contribution is due partly to Japan’s strong
domestic demand, which is boosting imports.
However, some economists worry that net exports could
subtract from growth this year as companies continue to look for
low-cost centres outside of Japan to produce their goods, which
means they ship less from Japan.
Recent turmoil in some emerging markets has also raised
concern about an external shock that could harm Japan’s exports.
Earlier this month parliament approved a 5.5 trillion yen
stimulus package that Abe’s government will use to soften the
blow from the sales tax hike.
The package relies on public works spending, but recent
delays in government construction projects due to labour
shortages could slow the pace of future public works.
Bank of Japan Governor Haruhiko Kuroda has dismissed the
need for additional monetary easing as consumer prices are
headed toward its 2 percent inflation target and as overseas
economies recover.
The BOJ announced a huge stimulus programme in early 2013
and prefers not to ease again unless the sales tax hike causes
far more economic pain than expected.
(Editing by Shri Navaratnam)
