* Q1 GDP +0.9 pct vs forecast +0.7 pct in Reuters poll
* Private consumption, exports up, capex disappoints
* Economists see economy to sustain growth in Q2
By Tetsushi Kajimoto and Kaori Kaneko
TOKYO, May 16 Japan's economy grew faster than
expected in January-March, expanding at its quickest pace in a
year on the back of solid private consumption and a rise in
exports spurred by Prime Minister Shinzo Abe's aggressive
monetary and fiscal stimulus.
Thursday's Cabinet office data showed, however, that
corporate investment has yet to follow to ensure a sustained
Gross domestic product (GDP) rose 0.9 percent from the
previous quarter, against the median forecast of 0.7 percent
expansion in a Reuters poll of analysts. The growth translated
into an annualised 3.5 percent, compared with 2.5 percent for
the United States in the same quarter.
The data -- which covers the first full quarter since Abe's
return to power in late December -- is viewed as the first
comprehensive report card on his plan to revive the world's
third-largest economy. Solid readings will help Abe keep high
support until the upper house poll in July.
The first quarter gain mainly reflects the psychological
effects of improved expectations behind rising domestic demand.
Analysts expect the pick up in domestic demand and export income
that Abe is hoping to jolt the economy out of its two-decades of
stagnation will materialise ahead.
"Personal consumption was really strong and exports did
better than expected. Stock gains and expectations for higher
salaries are driving consumption now," said Hiroaki Muto, senior
economist at Sumitomo Mitsui Asset Management Co. in Tokyo.
Private consumption, which accounts for roughly 60 percent
of the economy, rose 0.9 percent as expected and was up for a
second consecutive quarter, reflecting the better consumer mood
helped in part by a buoyant stock market.
Exports, helped by the yen's retreat to 4-1/2-year lows
against the dollar, beat expectations, making a 0.4
percent net contribution to GDP, despite higher import costs
caused by a weaker currency.
Capital spending disappointed, however, falling 0.7 percent
in the quarter, defying expectations of a 0.7 percent increase,
in a sign that despite improved business sentiment Japanese
companies remain cautious and hesitant to boost investment.
Consumer spending could suffer from rising costs of energy
and imported goods unless the summer round of bonuses boosts
incomes enough to make up for a squeeze in disposable incomes.
Abe has yet to deliver pro-growth reforms promised as part
of his three-pronged strategy. But extra stimulus spending and
the Bank of Japan's plan to double its government debt holdings
have lifted consumer and business mood, sending the yen
sharply lower and boosting share prices by 70 percent since
November when Abe first presented his economic plans.
Even though it is far from clear whether "Abenomics" will
bring back sustained solid growth that has eluded Japan for the
past two decades, analysts expect the economy to maintain
momentum in the current quarter, helped by public investment, a
weak yen and recovery in the U.S.
"The economy will enjoy strong growth for another year or
so. It's no longer just about brightening sentiment and rises in
equities prices. There's now proof that Abenomics is working and
that the economy is on a solid footing," said Yoshiki Shinke,
senior economist at Dai-Ichi Life Research Institute in Tokyo.