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 The revised fourth quarter data joins a mixed batch of indicators
over recent months that underscore a fragile recovery from a
recession, which analysts say could pressure the Bank of Japan to
inject fresh stimulus later this year to meet its inflation goal and
beat back years of falling prices.
The economy grew an annualized 1.5 percent in October-December,
Cabinet Office data showed Monday, down from a preliminary reading
of an annualized 2.2 percent expansion and below the median estimate
for 2.2 percent growth.
Consumer spending in the fourth quarter was revised up, showing some
parts of the economy are improving. However, weak capital
expenditure suggests Tokyo's policy mix of fiscal and monetary
expansion and structural reforms have so far failed to generate a
virtuous cycle of higher consumption driving corporate earnings,
wages growth and business investment.
"One reason for the disappointing capex is the shift in production
overseas that has been happening for the past few years," said Norio
Miyagawa, senior economist at Mizuho Securities.
"I still expect the economy to continue to grow, but the virtuous
economic cycle that policymakers have been talking about really
hasn't fallen into place yet."
In response to worries about the pace of economic growth and in an
indication of the BOJ's readiness to defend its inflation target,
deputy governor Hiroshi Nakaso said on Monday that further monetary
easing is likely if oil price falls hamper its efforts to ramp up
inflation expectations.
On a quarter-on-quarter basis, the economy grew 0.4 percent in the
fourth quarter, compared with a preliminary reading of 0.6 percent
increase and expectations of 0.6 percent.
Fourth quarter GDP growth was mainly undermined by weak business
investment and inventories.
Capital expenditure fell 0.1 percent from the previous quarter, less
than a preliminary 0.1 percent increase and less than the median
estimate for a 0.3 percent expansion.
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The immediate outlook for capex may not look rosy either, as a
Reuters poll forecast machinery orders to have fallen 4.1 percent in
January from the previous month, after having risen 8.3 percent in
December, the fastest pace in six months.
Consumer spending, which is crucial to achieving policymakers' aim
of spurring sustainable economic growth, rose 0.5 percent, more than
a preliminary 0.3 percent increase.
Other data this year on consumer spending has been less convincing,
and there are lingering doubts whether the BOJ can achieve 2 percent
inflation sometime around next fiscal year starting from April.
Economic growth is expected to accelerate in the current quarter to
a 2.4 percent annualized expansion, according to a Reuters poll, but
some economists have doubts whether this pace can be sustained.
(Additional reporting by Leika Kihara; Editing by Shri Navaratnam)
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