Sub-par growth sees Japan crawl out of recession in 2014

Japan’s economy rebounded from recession in the final quarter of last year but growth was weaker than expected as household and corporate spending disappointed, underlining the challenge premier Shinzo Abe faces in shaking off decades of stagnation.

The annualised 2.2 per cent expansion in October-December was smaller than a 3.7 per cent increase forecast, suggesting a fragile recovery as the hangover from last year’s sales tax hike lingered.

The preliminary reading for gross domestic product (GDP), which translates into a quarter-on-quarter increase of 0.6 per cent, follows two straight quarters of contraction, data by the Cabinet Office showed on Monday.

Economic Minister Akira Amari told reporters after the data’s release that the economy was on track for a recovery with signs consumer sentiment is picking up. But analysts pointed to the weak rebound in consumption and capital expenditure as worrying signs to the outlook.

“These are somewhat disappointing figures,” said Takeshi Minami, chief economist at Norinchukin Research Institute. “The situation remains weak and companies are clearly postponing investments.”

The rebound from recession, however, will allow the Bank of Japan to hold off on expanding monetary stimulus for now even as slumping oil prices push inflation further away from its 2 per cent target, analysts say.