Japan’s GDP grew by 3.5 per cent year on year in the first quarter, an above-expected rise that suggests prime minister Shinzo Abe’s aggressive deflation tactics are working.
This was the second quarter of growth following last year’s stagnation, according to a release from the cabinet office in Tokyo.
At the start of April, Mr Abe announced plans to double Japan’s monetary reserves and target 2 per cent inflation through asset purchases, including those of government bonds. Since then, the yen has weakened considerably against the dollar, while the Japanese stockmarket is at its highest level for five years.
“These figures are positive proof that Shinzo Abe’s shock and awe tactics have injected enough confidence to stimulate a stagnating economy and consumer spending,” said Nancy Curtin, chief investment officer of Close Brothers Asset Management.
“Further growth is likely to follow as the impact fiscal and monetary policy is fully felt. On the ground, large retailers have started to report improved sales as consumers look to buy ahead of higher inflation following the fiscal stimulus.
“At the recent G7 meeting no-one batted an eyelid at the yen’s devaluation or Japan’s aggressive fiscal policy, but if currency weakening continues, it will benefit Japanese exporters in the coming months. This could add further impetus to Japanese equities, which are already at five-year highs.”
