Japan's economy in the first quarter expanded faster than previously expected, because the reduction of capital expenditure was less than the initial assessment. However, there are still concerns about slowing consumer spending and lower export volumes.
"The upward revision is insignificant, and, if we exclude the effect of the leap year, the growth is not so high, - said Shuji Tonutti, a senior economist at Mitsubishi UFJ Morgan Stanley (NYSE: MS) Securities. - We expect a slowdown in the current quarter, the Government should focus on the steps that will help people with low incomes, but consumption will not increase so much if consumer sentiment will deteriorate."
A further yen growth could result in decreased profits of exporters and to discourage the companies’ desire to increase investment and wages.
The third largest economy in the world has increased in the period from January to March by 1.9 % in annual terms, showed government data on Wednesday. Earlier, authorities reported an increasing GDP by 1.7 %.
The revised figure coincided with the average forecast of analysts polled by Reuters.
Compared with the previous quarter, gross domestic product increased by 0.5 %, exceeding the preliminary estimate of 0.4 % and the average forecast of analysts.
Excluding the impact of an extra day of leap year, GDP probably expanded by about 0.2 %, said Tonutti.
Capital spending, one of the main components of GDP, fell 0.7 %, while the previously reported decline was 1.4 %.
Private consumption, which accounts for about 60 % of economic activity, rose 0.6 %, slightly exceeding preliminary assessment of 0.5 %.
As for the stock market, the leading Japanese stock index – Nikkei rose on Wednesday, recouping the initial losses after the relatively favorable data on China's trade overshadowed investors' concerns about the strengthening yen.
The Nikkei rose 0.9 % to 16 830.92 balancing between positive and negative territories.
The broader Topix index rose 0.8 % to 1350.97 points.