Japan economy grows slightly on consumer spending

Bloomberg News Service

TOKYO — Japan's economy grew 0.1 percent in the first quarter, contrary to initial estimates of further slowdown, as consumer spending rose more than first reported.

The initial estimate, released one month ago, said the economy shrank 0.2 percent in the three months ended March 31. According to the revised figures, the economy grew at a 0.5 percent annual pace in the first quarter from a 2.6 percent rate in the fourth quarter.

The report shouldn't be mistaken for good news, analysts said. The return to growth sets Japan up for an even bigger decline in the second quarter, and it does nothing to change the view that the world's second-biggest economy is bogged in recession.

The first quarter's growth is "not really any consolation as GDP is expected to have plummeted" last quarter, said James Malcolm, senior economist at J.P. Morgan Securities (Asia) Ltd. The economy probably shrank at an annual 4.5 percent pace, he said.

The report did little to cheer investors. The Nikkei 225 stock index fell as much as 2.5 percent in early trading to 11,450.77, about 50 points above Monday's 16-year low. Honda Motor Corp., Toyota Motor Corp and other exporters led the decline as the yen rose to a two-month high.

The yen was recently trading at 119.55 to the dollar.

Consumer spending, which accounts for about 55 percent of the economy, rose a revised 0.6 percent in the first quarter. According to the initial estimate, spending was unchanged in the first quarter from the fourth.

Business spending, which accounts for about 15 percent of gross domestic product, fell 0.9 percent, compared with an initial estimate of a 1 percent decline.