TOKYO: Japan’s economy has been reported its first quarterly growth since the consumption tax rate was raised from 5 to 8 percent last April, according to the Cabinet Office’s preliminary report on the country’s gross domestic product.
Released Feb. 16, the report shows that Japan’s GDP increased 0.6 percent–or 2.2 percent of growth on an annually adjusted basis–between October and December 2014 in real terms compared with the July-September period. It marked the first positive growth in three quarters.
The same day, Akira Amari, the minister in charge of economic recovery, urged companies whose businesses have seen a recovery to pay higher wages to their employees. “Consumer sentiment has significantly improved, offering good prospects for the future,” Amari said at a Feb. 16 news conference. “It is extremely important to increase wages in real terms.”
Although corporate activities, such as exports, saw a solid recovery, growth in personal consumption remained sluggish during the last three months of 2014. Consumer spending, which accounts for about 60 percent of GDP, rose just 0.3 percent from the previous quarter. Although it was the second consecutive quarter of expansion, the growth rate was unchanged from the July through September term. Sales for mobile phones, computers, beverages, restaurants and lodging facilities increased, but sales fell for TVs, video games, toys and other such products.
Because wage increases failed to cover swelling commodity prices, the drop in real income, coupled with the continuing adverse effect of last year’s hike in the consumption tax, pushed down the growth rate for the latest quarter, according to the report. Whereas many consumers purchased houses before the sales tax rate was raised, residential investment dropped 1.2 percent during the October to December quarter, the third straight quarter of decline. The rate of decrease shrank compared with the previous term. In comparison, exports of telecommunication devices and chemical and oil products to the United States and Asian countries were brisk, with the total amount of exports from Japan increasing by 2.7 percent. It was the second consecutive quarter of growth.
Capital investment also grew 0.1 percent–the first increase in three quarters. Companies invested a larger amount of funds in PCs and other electronic communication devices, as well as software programs, although investment in industrial machinery and facility construction declined. Public works spending rose 0.6 percent, marking three straight quarters of growth. The real annual growth rate for 2014 was up 0.04 percent from the previous year. Although it marked the third consecutive year of GDP expansion in the nation, the rate of increase shrank from 1.8 percent in 2012 and 1.6 percent in 2013.
