Japan economy grows again, points to recovery

Japan economy grows again, points to recovery

TOKYO - Japan said Thursday that its economy grew again in the quarter to March, pointing to a recovery as Tokyo and its hand-picked central bank team set about stoking the world's third-largest economy.

The 0.9 per cent on-quarter growth - or 3.5 per cent on an annualised basis if the data were stretched over a year - confirmed Japan's exit from recession as consumers spent more, although the nation's cautious firms did not follow suit.

The data were seen by some observers as an early mark of success for Prime Minister Shinzo Abe's bid to stimulate the long-stagnant economy with a policy prescription of big government spending and aggressive central bank easing.

Dubbed "Abenomics", the moves mark a renewed assault on the deflation that has plagued Japan's economy for years, crimping private spending and business investment.

The central bank's recent policy moves have helped push down the value of the yen, giving a boost to the export sector as it makes Japanese firms more competitive overseas and inflates the value of repatriated foreign income.

The currency's steep decline in recent months - losing around one-quarter of its value since November - has translated into a huge rally on the Tokyo Stock Exchange with foreign investors piling into Japanese stocks.

"The Japanese economy is on the right track to recovery," said Hideki Matsumura, senior economist with the Japan Research Institute.

"Individual spending is picking up as the value of assets, including stocks, rose on the back of the brighter economic outlook. Exports are also recovering. The economy is expected to grow further for now thanks to the impact of Abenomics."

But a 0.7 per cent drop in capital spending highlighted still-weak spending by firms, while a series of tax hikes aimed at doubling the national sales tax to 10 per cent by 2015 could also hit private spending, analysts said.

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