Published: Fri, May 19, 2017
Markets | By Erika Turner

Japan economy expands at 2.2 percent annual pace in Jan-Mar

Japan economy expands at 2.2 percent annual pace in Jan-Mar

The yen's recent depreciation against the dollar amid hopes for a stronger USA economy apparently helped Japanese exporters as a weak yen tends to make their products competitive and boost overseas profits when repatriated.

That would be the best run since 2006, during Japan's last period of political stability under the leadership of then-Prime Minister Junichiro Koizumi.

The latest quarter-on-quarter growth translates into a 2.2 percent annualized rise, outpacing the median forecast of a 1.7 increase in a Jiji Press poll of 21 economic research institutes.

The scheme is a mix of huge monetary easing, government spending and reforms and has stoked a stock market rally and fattened corporate profits.

Exporters have been helped by the recent falls in the yen against the U.S. dollar, which has made their products more competitive and has boosted the value of profits earned overseas.

But there has been growing criticism about the plan's muted impact on the wider economy.

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On average, analysts were expecting first-quarter revenue of about $169 million, but Snap reported revenue of just $150 million. An estimated 8 million new Snapchat accounts were created in the last quarter, the slowest user-growth quarter yet.

An improving global outlook with strong demand for Japanese smartphone parts, memory chips and construction machinery has been a positive sign.

The GDP data came as a relief to Abe and policymakers trying to encourage frugal Japanese consumers and companies to spend more and buttress economic growth. Recent signals from the Bank of Japan suggest that Abe's easy monetary policies and ultra-low interest rates are here to stay, and the Prime Minister has lately turned his eyes to reforming Japan's rigid labor laws. "However we expect a slowdown in the second half of the year, ' he said".

Cash-rich firms have been stingy with pay hikes though, which hurts spending and acts like an anchor on the economy. Real wages also were losing ground, she said.

"This seems to be because aggressive monetary easing has failed to lift expectations of future price rises among households and firms".

Despite healthy profits, many Japanese firms remain cautious about the world economy, partly due to worries that US President Donald Trump's protectionist leanings could hurt exports.

The country has struggled for decades with sluggish growth and falling prices.

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