Latest Estimate First Quarter Growth Now 6.7%
Econintersect: The Japanese economy grew even faster than first estimated in 1Q 2014. The preliminary estimate of 5.9% (quarterly change, annualized) 
has been revised up to 6.7%, largely on a surge of Capex spending. However, investment, as well as consumer spending, may not sustain the first quarter strength because the level was bolstered by anticipation of the large consumption tax increase that took effect the first day of the second quarter. The higher tax will impact all levels of the Japanese economy because it functions as a value-added tax and hits all levels of business and production, even imports.
The growth in the first quarter reached a level exceeded in only five of the last 41 quarters.
It will be prudent to average the first quarter performance with that of the second quarter when those numbers become available in August, September and October. Much of the higher growth in 1Q may be seen as lower expenditures in 2Q due to impacts of the big tax hike.
One area that may be less impacted is tourism. This quarter was the first in 44 years where foreign visitors to Japan spent more money than the Japanese did traveling abroad.
Sources:
- Japan’s economy picks up speed on unexpected surge in capex (Leika Kihara and Tesushi Kajimoto, Reuters)
- Japan GDP revised higher on capital-spending surge (Takashi Nakamichi, MarketWatch, The Wall Street Journal)
- Japan Gdp Growth Annualized (Trading Economics)
