TOKYO: Japan’s economic growth in the last quarter of 2013 was weaker than previously thought, revised data showed on Monday, underscoring concerns about the pace of recovery driven by Prime Minister Shinzo Abe’s economic growth blitz.
The fresh figures will turn the focus to Bank of Japan (BoJ) policymakers as they start a two-day meeting, amid speculation over whether they will launch further monetary easing measures to counter a slowdown from a tax rise next month.
The rate hike—seen as crucial to bringing down Japan’s massive national debt—has stoked fears of a slowing recovery, as consumer spending drops off owing to higher prices.
The world’s number-three economy expanded 0.2 percent in the quarter to December and 1.5 percent through 2013.
That was down from figures last month showing gross domestic product grew 0.3 percent for the October-December period and 1.6 percent in 2013.
The 2013 growth figures still marked Japan’s best annual performance in three years, as Abe’s growth blitz, dubbed Abenomics, rippled through the economy.
“The recovery… lost pace in the second half of the year,” said London-based Capital Economics.
“Nonetheless, it would be premature to conclude that Abe–nomics has failed based on these figures alone,” it said.
“After all, private consumption and business investment were stalling before PM Abe’s election, but have picked up speed since then. The problem instead lies on the external side,” it added.
A key reason for the downward revision was weak exports, as Japan’s trade imbalance balloons on the back of surging energy bills sparked by the shutdown of its nuclear reactors following the Fukushima crisis.
Atomic power once supplied about a third of the resource-poor nation’s energy.
Ballooning trade imbalance
In separate data on Monday, the deficit in the January current account—Japan’s broadest measure of trade with the rest of the world—more than quadrupled to another record figure of 1.589 trillion yen ($15.4 billion).
The growing imbalance was driven by the soaring costs of imported energy—made pricier by a weak yen—and lackluster growth in shipments of Japanese goods abroad.
Critics fear that the controversial sales tax rise to 8.0 percent from 5.0 percent would curtail the budding recovery in an economy beset by years of falling prices, which curbed spending and business investment.
Since the conservative Abe swept national elections in late 2012, the yen lost about a quarter of its value against the dollar—giving a boost to Japanese exporters’ profitability.
The Nikkei shares index soared 57 percent in 2013, its best performance in more than four decades, while Japan’s growth led Group of Seven nations in the first half of last year.
Abe has called on firms to hike wages as consumers face higher prices for ordinary goods, while many complain they have yet to reap the benefits of the growth campaign.
Tokyo also launched a special $50-billion stimulus package to counter any downturn from the nation’s first sales tax hike since the late 1990s, which shortly preceded years of tepid growth.
While Tokyo has made some headway on its bid to stoke lasting inflation, consumer and corporate spending in the latter half of the year failed to take off, underscoring a still-cautious mood among households and in the country’s boardrooms.
But the tax rise is perhaps the biggest threat to Abe’s efforts and has led to speculation the BoJ will be forced to expand its already unprecedented monetary easing drive.
The program launched by the central bank is a cornerstone of Abe’s policy, meshing big government spending and easing measures.
It also calls for deeper reforms, most yet-to-be-seen, including free-trade deals, more flexible labor markets, and bringing more women into the workforce.
Japan’s economy grew 1.4 percent in 2012 and contracted 0.5 percent in 2011 as the country was hammered by a quake-tsunami disaster and subsequent nuclear crisis.