Dismal results expected to prompt Prime Minister Shinzo Abe to call a snap election in world’s third largest economy.
Japan’s economy has rebounded out of recession in the last quarter of 2014, according to official data, but growth and internal spending have been weaker than expected, underlining the challenge the government faces in shaking off decades of stagnation.
The 0.6 percent quarter-on-quarter expansion in the world’s number three economy between October and December follows two consecutive quarters of contraction that came as an April sales tax rise hammered consumer spending.
The year-on-year 2.2 percent expansion in October-December was smaller than a 3.7 percent increase forecast in a poll by the Reuters news agency, suggesting a fragile recovery as the hangover from last year’s sales tax hike lingered.
However, over the full calendar year the preliminary data showed zero growth, compared with 1.6 percent expansion in 2013. Revised figures will be released in the following weeks.
The US economy grew at its fastest pace in four years in 2014, expanding 2.4 percent.
Economic Minister Akira Amari told reporters after the data’s release that the economy was on track for a recovery with signs consumer sentiment is picking up.
Mariginal hike in conspumtion
The data will be one of the key factors the bank will scrutinise at its two-day rate review ending on Wednesday, where it is widely set to maintain the current pace of asset purchases in its monetary stimulus programme.
Private consumption, which makes up about 60 percent of the economy, rose 0.3 percent in the final quarter, less than a median market forecast for a 0.7 percent increase.
Capital expenditure also rose just 0.1 percent after two straight quarters of declines, suggesting the Bank of Japan’s aggressive money printing has yet to nudge firms into boosting investment.
In a glimmer of hope, external demand added 0.2 percentage point to growth on robust shipments to the US and China, Japan’s two biggest export destinations.
One of the biggest headwinds for Japan is a deteriorating global economic outlook, which has triggered a wave of monetary easings around the world to fight deflationary pressures and prop up growth.
However, Japanese policymakers are hoping a rebound in exports, which had been a soft spot in the economy despite support from a weak yen, and lower fuel costs will encourage firms to spend more on wages and expenditure.