TOKYO — Japan’s economy expanded at a slower-than-expected 1 percent annualized rate in the last quarter of 2013, raising pressure on the central bank to step up already massive stimulus to sustain the recovery.
The data released Monday showed a 0.3 percent expansion for the world’s third largest economy from the previous quarter, adjusted for inflation. That was less than half of some forecasts despite a boom in housing construction and stronger public and private spending.
Slower growth in China and other major markets has taken a toll on exports, crimping growth at a critical time for Prime Minister Shinzo Abe’s recovery program.
“The big disappointment was net exports, which shaved off 0.5 percentage points from headline growth,” Capital Economics said in a commentary Monday.
The preliminary data show the economy grew an estimated 1.6 percent in 2013, the Cabinet Office reported. That was only slightly stronger than the 1.4 percent expansion in 2012.
It was the fourth straight quarter of expansion since the economy emerged from recession in late 2012, and gained momentum on a combination of strong government spending and aggressive monetary easing.
The Bank of Japan’s monthly monetary policy meeting begins Monday. Ahead of the release of the latest data, the central bank had been expected to keep monetary policy unchanged, while promising more stimulus if necessary to cushion the blow to consumer and corporate demand from a 3 percent sales tax hike that takes effect April 1.
Economists expect the tax hike to cause the economy to contract in April-June after expanding in this quarter, as consumers move up purchases to beat the tax hike and then tighten their belts afterward to compensate for higher costs.
A Kyodo news service telephone survey released Monday showed 65 of those asked intend to cut spending after the tax hike.
Japan’s consumer price index rose 0.4 percent in 2013, the first increase in five years, but after a strong start growth slowed later in the year as corporate investment remained sluggish and exports were sapped by lackluster growth in emerging economies.
The weakening of the yen that accompanied monetary easing increased demand for imports faster than it may have helped exports, pushing Japan’s trade balance into the red.
Other recent data have been mixed.
Corporate demand for bank loans has risen moderately, climbing 2.1 percent increase in 2013 from the year before, compared an average annual decline of 1.5 percent in 2000-2012.
But so far, companies appear to be focusing much of their investment on overseas markets.
Machinery orders, a major trend setter for corporate spending, fell 3.1 percent month-on-month in December, with core private sector orders dropping 15.2 percent, the biggest plunge since the government began its current data series in 2005.
“The sharp fall in machinery orders in December casts doubt on whether the fledgling recovery in business investment will continue,” said Capital Economics economist Marcel Thieliant. “Overall investment is set to weaken in coming months as housing construction will likely fall sharply after the consumption tax hike in April.”