Japanese growth data revised higher

Japanese growth data revised higher

Japan has revised up its growth data for the April to June quarter, adding to hopes of an economic recovery.

The economy expanded 0.9% during the period, compared to the previous three months. That translates into an annualised growth of 3.8%.

The initial estimate of quarter-on-quarter growth was 0.6%.

Japan has taken aggressive measures in recent months to spur growth in the world’s third-biggest economy, after years of stagnation.

“The moves by Japanese policymakers have fuelled optimism of a recovery, which has seen companies start to invest more,” Martin Schulz of Fujitsu Research Institute told the BBC.

“That is trickling down into the labour market and the real economy. The affect of that is now starting to show in the numbers,” he explained.

Sales tax

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The upward revision means that the government can raise the sales tax as scheduled”

Hiroaki MutoSumitomo Asset Management

The upward revision also comes at a time when the Japanese government is considering raising the rate of sales tax – called consumption tax in Japan.

The rate currently stands at 5% and under government plans that could double to 10% by 2015.

Policymakers have argued that the move is key to cutting Japan’s high public debt, which stands at around 230% of its gross domestic product (GDP) – the highest among industrialised nations.

At the same time the government needs to increase its income to fund rising welfare costs as its population continues to age.

It is estimated that 40% of Japan’s population will be of retirement age by 2060.

But there have been concerns that raising the tax may hurt domestic demand and derail the ongoing economic recovery.

Analysts said the upgrading of growth numbers may make it easier for lawmakers to go ahead with the planned increase.

“Japan’s economic recovery will continue due to strong personal consumption and public works spending,” said Hiroaki Muto, a senior economist with Sumitomo Asset Management in Tokyo.

“The upward revision means that the government can raise the sales tax as scheduled.”

‘Perfect match’

The economy got a further boost over the weekend as Tokyo won the bid to host the 2020 Olympic and Paralympic Games.

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Nikkei 225 Index

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Japan will spend an estimated $8bn (£5bn) on refurbishing old stadiums and building new ones.

Analysts say spending and construction activity will further help boost Japan’s economic recovery in the coming years.

Masamichi Adachi, a senior economist at JP Morgan said that an important aspect of winning the bid is “the confidence” derived from winning the competition to host such a big tournament.

“It makes people feel that we have to do more. That kind of sentiment will give a boost to the economy.”

Japan’s Nikkei 225 index jumped more than 2% on Monday, as the Olympic bid win and the upward revision to growth numbers boosted investor sentiment.