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Japan’s revised GDP signals moderate recovery

Japan’s Prime Minister Shinzo Abe

KIM KYUNG-HOON/REUTERS

Japan's economy stabilized in the fourth quarter after two quarters of a shallow recession, revised data showed on Friday, but a third consecutive monthly current account deficit in January showed an anticipated recovery was slow in coming.

The data signalled the challenge facing Prime Minister Shinzo Abe, who swept to power in December promising more fiscal spending and big monetary stimulus to rev up the economy and end nearly two decades of deflation.

His policies have driven the yen to 3-1/2 year lows against the U.S. dollar, supporting the economy's traditional export engine. But the weaker currency has also driven up import costs at a time when energy imports have surged, putting pressure on the balance of payments.

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Japan's gross domestic product was unchanged in October-December from the previous quarter, revised data from the Cabinet Office showed.

That compared with a median forecast of economists for 0.1 per cent growth, and an initial estimate of a 0.1 per cent contraction, reflecting upward revisions to private capital spending and inventory and private consumption.

Separate data from the finance ministry showed Japan's current account deficit was ¥364.8-billion ($3.85-billion U.S.) in January. That was less than a median forecast for a deficit of ¥626.0-billion, but marked a third straight month of deficit, the longest sequence since the series began in 1985.

On Thursday, the Bank of Japan held policy steady and said in its assessment the economy had stopped worsening. That chimed with economists' view there will be moderate growth this year on the back of a global recovery and Abe's policies.

Investors expect the central bank will become more aggressive in its policy from next month, with Haruhiko Kuroda, the president of the Asian Development Bank and an advocate of aggressive easing, set to become governor in coming weeks.

"The GDP headline is in line with the expectation and there is no change to a view that the economy has hit the bottom late last year," said Yasuo Yamamoto, senior economist at Mizuho Research Institute.

"But a pick-up in exports is tepid, reflecting slower recovery in overseas economy than the market has expected. The nation's economy probably won't be able to reach annualised 2-per-cent growth January-March."

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The GDP figures translated into annualised growth of 0.2 per cent in price-adjusted real terms, in line with expectations and better than an initial reading of a 0.4 per cent contraction, the data showed.

Japan's performance compared with an annualised 0.1-per-cent expansion in the United States in the same period, and a 2.3-per-cent contraction in the 17-country euro zone.

Capital expenditure fell a revised 1.5 per cent in the fourth quarter, compared with a 1.2-per-cent decline expected by economists and a preliminary reading of a 2.6-per-cent decline.

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