May 21, 2019 (Nikkei) - Japan's economy unexpectedly grew in the first quarter, giving Prime Minister Shinzo Abe some momentum to go ahead with his plan to raise the country's consumption tax this fall.
Gross domestic product for the quarter expanded at an annualized rate of 2.1%, preliminary figures released by the Cabinet Office showed on Monday, much better than the 0.2% contraction forecast by economists in a Reuters poll.
The gain was attributed to positive net exports and an increase in government spending, which offset weaker private investment and personal consumption. This follows a 1.6% expansion in the previous quarter and marks Japan's fastest growth rate since the April-June term of 2018.
Shortly after the figures were released, Economic Revitalization Minister Toshimitsu Motegi told reporters that "there is no change in the idea of raising [the consumption tax] in October" to 10%, from 8%.
Marcel Thieliant, senior Japan economist for Capital Economics, said the economy's "surprising resilience" suggests Abe will follow through with the tax increase.
Masamichi Adachi at JPMorgan Securities Japan agreed. "We now see lower probability of the postponement of the scheduled hike in October to less than 30%, from 30-40% we had thought before the release" of the GDP.
Yet, a closer look at the figures reveals that a continued economic recovery is far from certain.
