Japan's revised Q1 growth blows past expectations

It seriously looks like Abenomics is really taking its course now.

Such a recovery simply wouldn't have happened without Abe's ascendence to leadership.

Given that Japan still has a lot to do to close its productivity gap with other developed countries, I think they still have a lot of room to grow.

Abe rocks!

All I hope for is that Japan's economy recovers and keeps on growing bigger again. More jobs equals more money for everyone.

Smoke and mirrors.

if household spending remains in the doldrums, then this data means absolutely nothing. these figures are only due to the weakining of the yen, and not on any meaningful policy implemented by the LDP. trickle-down-economics just doesn't work.

if household spending remains in the doldrums, then this data means absolutely nothing. these figures are only due to the weakining of the yen, and not on any meaningful policy implemented by the LDP. trickle-down-economics just doesn't work.<

It absolutely does have to do more than with the weakening of the yen. The important factor here is not the weakening of the yen, but rather that fact that the GDP deflator has clearly shown signs of a strong upturn. Given that nominal growth is now 9% annualized, this is a really, really important figure. Nominal growth improvements will filter into stronger sentiment and thereby increase investment, wage increases,and spending and therefore fuel a rise in real GDP as well.

QE was clearly a strong solution, since by cornering the bond market, the BoJ was able to reflate the economy by enabling increased bank lending to sectors that really need it. I say that monetary issues were at fault for the lackluster performance, and now with those issues alleviated there will be much smoother sailing.

Additionally, with more reforms, this growth can be sustained for quite awhile and really lead Japan somewhere.

One quarter doesn't make a trend, but I guess one good quarter is still better than another bad one.

Given that nominal growth is now 9% annualized

Nominal growth 9% annualized? You might want to double check that.

QE was clearly a strong solution, since by cornering the bond market, the BoJ was able to reflate the economy by enabling increased bank lending to sectors that really need it.

It seems to me that QQE has merely increased the size of reserves held in current accounts at the BOJ. Not a lot of new lending has resulted so far as I can tell (which suggests the reason for sluggish lending is not for a lack of cheap funds).

Additionally, with more reforms, this growth can be sustained for quite awhile and really lead Japan somewhere.

I've been waiting for more reforms for as long as Abe has been in power. There hasn't been a lot of them, but we've been told to expect a detailed 3rd arrow reform plan "next summer" each year. I'm not holding my breath waiting for this year's summer to pass us by. Next year there are elections planned, so the chances are that nothing happens for that reason. There's too much politics in Kasumigaseki and not enough policy.

Nominal growth improvements will filter into stronger sentiment and thereby increase investment, wage increases,and spending and therefore fuel a rise in real GDP as well.

I dont see that happening anytime soon. The corporations have been reluctant about raising salaries, and a third of the workforce is in temp work. Add to that the disastrous demographic nightmare and you will not get out of this ecomomic slump.

Want a recovery? Its simple. Bring back the trillions of yen japan has in foreign reserves to shore up the debt, double the minimum wage and have all starting full time salaries at a minimum of 300 thousand yen a month. Have stricter enforcement on overtime so that people have time to go out and spend.

Put money into people's pockets and give them the time to go out and spend it. The economy will take care of itself. Simple.

I agree with the people who say this is short-lived. It's the calm before the storm.

Good post Aly Rustom.

I totally. Japan has never been Mr. Koji average, it has always been about the elites.

I agree with the people who say this is short-lived. It's the calm before the storm.

Exactly. Japan's currency manipulation will by the end of September set off an Asian currency war. Korea is already gearing up for a competitive currency devaluation, but with inflation just scraping up to 0.5%, it will hold off for now. Taiwan and Thailand, already suffering deflation, will be the first to enter the foray and China won't be far behind.

All Abenomics financial reforms have managed to do is export Japan's deflation abroad and not remedied the real structural/demographic problems that are the true cause.

@Bach T Tran. Have you ever been to Japan? The picture you have envisioned is just not the reality that the Japanese are experiencing. I don't know one single Japanese - and I know hundreds - who feel that Abenomics has materially improved their lives. Then again I'm not living in Aichi, near a Toyota factory - but even 60% of their workers there are contract workers who got no pay rise or bonus - and I don't hang out with the dankai generation and discus their shares.

household spending remains stubbornly weak as the Bank of Japan struggles to push up prices in a bid to end decades of deflation.

Household spending will continue to be weak if the government continues its anti-consumer policies. Without better incomes, and/or reduced income taxes, consumer spending won't deliver much of an impact. QE isn't the way to boost inflation as it doesn't significantly make a huge difference to working people's salaries.

Despite wage rises at big firms and a tighter labor market, convincing people to splash out on consumer goods has been a struggle after Japan raised sales taxes last year to help pay down a huge national debt.

The big firms' pay rises wear meager, at best. Like most governments, the Japanese government, at the federal and city level, will pounce on those extra earnings, negating whatever puny gains the 1% wage hike brings.

The government wants consumers to spend more of their discretionary income on good and services. Yet, it does everything to ensure that consumers can't spend more money.

Worse, the buying power of employees' wages is diminished by the tax rise, which has a knock on effect. Basic, essentially goods and services become more costly, making it impossible for consumers to "splash" out on discretionary purchases.

PM Abe squandered a golden opportunity to turn the economy around. Raising the consumption tax, without income tax cuts to offset it, was stupid, and unsound, grounded in false assumptions. Japan's debt woes weren't from a lack of tax revenue, but, from proliferate, unchecked, reckless spending.

Whoever PM Abe's advisers are, they're understanding of human behaviour, and economics is shockingly poor. Striving for growth then working against it with tax hikes is self-defeating, and a tragic waste of opportunity.

Certainly, some growth, however meager, is better than nothing. However, these numbers may well be an exception, and don't necessarily mean the economy will grow more robustly down the road.

double the minimum wage and have all starting full time salaries at a minimum of 300 thousand yen a month.

That makes it more expensive to hire staff.

As a consequence, businesses would hire less staff. As a consequence, people might spend even less, and things might get even worse.

We always need to be wary of well-intentioned policies. But government meddling in free markets does not always work out as it were hoped.

The economy will take care of itself. Simple.

Rather than create disincentives to hire more workers, what the government should do is remove the disincentives to doing business that currently exist.

Then businesses would likely want to hire more people, and then the labour market would be tightening for the right reasons, pushing up wages. Meanwhile business conditions would simultaneously improve.

I think the governments of the western world are going to wake up to this way of thinking within the next five years, and hopefully then things can finally start to get seriously better again.

Want a recovery? Its simple. Bring back the trillions of yen japan has in foreign reserves to shore up the debt

Um, Japan does not have billions of yen in foreign reserves. It has foreign reserves of foreign currencies. All the yen are sitting in Japan, they don't have to be brought back from anywhere.

Rather than create disincentives to hire more workers, what the government should do is remove the disincentives to doing business that currently exist.

Feel free to provide real world examples of people and companies not bothering to do business because of "disincentives".

"if the government continues its anti-consumer policies."

It's not the government that has "anti-consumer policies." It's the private sector, which earns record profits, hoards record amounts of cash, and yet is increasingly unwilling to give back to its workers.

Salaries remain the same. Consumer prices are rising.

How can anyone state that the economic situation is brighter?

I haven't noticed my wage nor my friends' wages increasing. I notice that the companies offering wage increases have not been named in the article.....

Correct me if I'm wrong, but didn't we see something like this before under Abenomics? A quick burst of positive-looking data only to slump again? But anyways, I think Japan should enforce companies (who are taking advantage of the weakening yen and making huge profits) to increase workers' wages and salaries so they can keep up with the inflation and rising prices, and also to further stimulate the economy through consumer spending.

Japan's revised Q1 growth blows past expectations

...and the unemployment rate actually looks better than pre-2008 financial crisis at under 3.5%.

I know, I know, let's wait and see though.

Nominal growth 9% annualized? You might want to double check that.<

Oh my bad, it was 9.2%.

not that far off if you ask me, unless you simply don't understand the difference between nominal and real GDP.

What I didn't understand is where you got a figure anywhere near 9% from.

It's not the government that has "anti-consumer policies." It's the private sector, which earns record profits, hoards record amounts of cash, and yet is increasingly unwilling to give back to its workers.

JeffLee, there's some truth to what you say. Corporations are being stingey with their cash, which, could be re-invested, or used to give better pay rises. However, the private sector, by its very nature, very much pro-consumer. Businesses, large and small, want people buying their goods, and services-especially those that are discretionary.

The business establishment in Japan is stogey, conservative, and very old-fashioned much like the government. I won't argue with you on that point. Fair enough, higher paydays would lead to better consumer spending, but, it's the government that is severely limiting consumer spending, not business.

A higher consumption tax means increased costs, which mean profit margins get narrower, that leads to higher prices for the goods and services, both essential and discretionary. The extra cost, unfortunately, is imposed on consumers across the board.

A hike in VATs works best when coupled with cuts in income taxes, and business taxes. The government refuses to take these steps; instead, it expects people to spend more of their stagnant incomes on products whose prices are rising faster than their salaries.

Also, consider, if businesses give back to their workers, the ward offices, and federal government will simply go after the extra income, reducing, if not eliminating, whatever gains made with a pay rise. So, while the business establishment isn't actively helping consumers, it's not kicking them in the teeth with needless tax increases.

From your posts, you seem to lean left, and therefore have an idealized vision of government. Certainly, government can do a lot of good, but, unfortunately, it's riddled with incompetence, dishonesty, cronyism, and corruption (regardless of the political leanings of the governing party).

Again, I don't deny the shortcomings of Japan's business establishment, but, you're giving the government a pass when it should be held to account for its appalling mismanagement, and utter stupidity.