Japan posts longest growth streak since bubble economy

[TOKYO] Robust consumer spending drove Japan's economy to eight straight quarters of growth in October-December, its longest continuous expansion since the 1980s bubble economy, and evidence that Prime Minister Shinzo Abe's campaign to restore growth after decades of stagnation is bearing fruit.

The long run of growth is also an encouraging sign for the Bank of Japan, hinting that the economy may at last be building enough momentum to lift consumer prices toward its 2 per cent inflation target.

Economists expect growth to continue as consumer spending, exports, and capital expenditure improve further.

Japan's economy has now posted the longest continuous expansion since a 12-quarter stretch of growth between April-June 1986 and January-March 1989 around the height of Japan's notorious economic bubble.

The economy expanded at a 0.5 per cent annualised rate in October-December, less than the median estimate for annualised growth of 0.9 per cent, Cabinet Office data showed on Wednesday. That followed a revised 2.2 per cent annualised increase in July-September.

Compared to the previous quarter, gross domestic product (GDP) grew 0.1 per cent, slightly less than the median estimate of 0.2 per cent growth and following a 0.6 per cent quarter-on-quarter expansion in July-September, Cabinet Office data showed on Wednesday.

Private consumption, which accounts for about two-thirds of GDP, rose 0.5 per cent from the previous quarter, more than the median estimate of a 0.4 per cent increase and a rebound from a revised 0.6 per cent decline in the previous quarter.

Capital expenditure rose 0.7 per cent in October-December from the previous quarter, less than the median estimate for a 1.1 per cent increase but up for the fifth straight quarter and a sign of sustainable gains in business investment.

Overseas demand subtracted fractionally from GDP in October-December. Exports rose 2.4 per cent, but this was offset by a 2.9 per cent jump in imports thanks to robust domestic demand.

Since taking office in late 2012, Mr Abe has enacted reforms to draw more women and elderly people into the workforce, raise wages for part-time workers, liberalise the labour market, and encourage business investment.

These policies have taken time to gain traction, but Japan's economic indicators started to turn around in earnest from last year.

REUTERS