Economic Growth In Japan Accelerated To 1.2% In The First Quarter As Consumer Spending And Housing Investment Rose

Economic growth in Japan rose in the first three months of the year as consumer spending and housing investment inclined, following an expansion during a previous quarter which confirms that the Japanese economy is on the right track to recovery from the worst recession since WWII.

Japan's annualized gross domestic product final reading grew 5% in the first quarter, after growing 4.9% during the previous quarter, while the actual reading topped analysts' estimates of 4.2%. Also the GDP expanded 1.2% in the first three months ended March, and the actual reading came inline with a previous, while the forecasts referred to 1%.

Moreover, increasing exports is the main reason behind today's cheerful report, and exports are the main pillar for the economy, which rose 6.9% in the first quarter from the previous three months, boosted optimism in the economy, and the net exports added 0.7 percentage points to the GDP.

The global demand increased, particularly from the demand from China rose in April as the manufacturing sector accelerated, which supported the Japanese exports to rise during the first quarter. Higher demand form China positively affected Japanese companies like Elpida memory Inc. and JFE holding Inc., while their earnings increased as rebound the demand in Asia.

Moreover, today's report showed that consumer spending, that account for more than half of the economy rose 0.4% in the first quarter, compared with a previous quarter, which inclined after the government incentives to purchase electronics and automobiles, despite the deflation risks still exists in the worlds' second economy.

Yesterday, the Japanese economy release machine order index which rose 4% in April, and the corporate earnings are encouraging companies in Japan to spend more on investing in plants and equipments like JFE holding, is the second largest steelmaker in Japan, which planning to spend 1 trillion yen ($11 billion) by next three years to benefit from higher demand in Asia as profitability increase.

Moreover, today's report showed the capital investment in Japan climbed 0.6%, which is less than 1% initially reported, and Japan's producer prices rose for the first time in 17 months in May as increase in raw material costs

As a result of cheerful GDP, the government indicated that the economic recovery is starting to spread, and the growth is not fast growth, but it's quality growth as well. Also from today's cheerful report, the analysts' expected the global growth may slow in upcoming period, while the Japanese economy will expand around 2%.

On the other side, increasing exports and sales, in addition to rebounding manufacturing output and inclining domestic spending, are supporting BOJ monetary policy makers to fight deflation risks that negatively affected economic activity which is why the BOJ decided to keep interest rates at 0.1%.