TOKYO (MNI) – Japan’s economy expanded for the fourth straight
quarter in January-March, led by a continued recovery in exports as well
as gains in consumer spending and business investment, the Cabinet
Office said on Thursday.

Gross domestic product grew 1.2% in the January-March period from
the previous quarter, or at an annualized pace of 4.9%, up from a
revised +1.0% q/q and 4.2% annualized in the fourth quarter (from +0.9%
q/q and +3.8% annualized).

The first quarter economic growth came in slightly below the
consensus call of a 1.3% quarter-on-quarter rise, or an annualized rate
of 5.6%, with economist forecasts ranging from +1.1% to +1.6%, or an
annualized +4.6% to +6.5%.

Q1 growth was boosted by domestic demand, which rose 0.6% q/q after
an unrevised 0.4% gain in the fourth quarter. Domestic demand added
0.6 percentage point to Q1 GDP, up from the 0.4 point contribution the
previous quarter.

Within domestic demand, capital spending rose for the second
straight quarter, but growth slowed to +1.0% in Q1 from +1.3% in Q4.
Capex contributed 0.1 percentage point to Q1 GDP.

Growth in private consumption, which makes up about 60% of GDP,
also slowed, to +0.3% q/q in Q1 from +0.7% in Q4, contributing +0.2
percentage point to Q1 growth.

But inventory changes added to GDP, contributing 0.2 percentage
point in Q1 after pushing down overall growth by 0.2 percentage point in
the fourth quarter of 2009.

And housing construction was neutral, rising a modest 0.3% q/q in
Q1 after a revised 2.7% fall in Q4. This category had zero contribution
to Q1 GDP after rounding.

Despite the government’s fiscal stimulus measures, public
investment dropped 1.7% in Q1, after a 1.2% fall in Q4. This category
subtracted 0.1 percentage point from Q1 GDP.

Q1 GDP growth was also boosted by net exports, which pushed up
overall growth by 0.7 percentage point after adding 0.6 percentage point
in Q4.

Exports were up 6.9% on quarter, posting the fourth consecutive
quarterly gain, after +5.8% in the previous quarter, while imports rose
2.3% q/q, marking the third consecutive quarterly increase (+1.5% in
Q4).

From a year earlier, Q1 GDP rose 4.6%, posting the first y/y rise
in seventh quarters, after -1.1% in Q4.

For the whole of fiscal 2009 that ended in March, the economy
contracted by 1.9%, down for the second straight year after a 3.7%
decline in fiscal 2008.

In nominal terms, the economy expanded by 1.2%, or an annualized
4.9%, in the first quarter of 2010, up for the second consecutive
quarter.

Deflation accelerated in the first quarter, the GDP data
showed.

The GDP deflator was down 3.0% from a year earlier after
falling 2.7% in the fourth quarter of 2009.

But the domestic demand GDP deflator fell 1.9%, a smaller fall than
the 2.6% drop the quarter before.

tokyo@marketnews.com
** Market News International Tokyo Newsroom: 81-3-5403-4833 **

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