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Cheap money fuels Japan growth

May 16, 2013

Japan's economy has expanded rapidly in the first quarter, boosted by growing exports and higher consumer spending. Prime Minister Shinzo Abe's huge fiscal stimulus, known as Abenomics, seems to be working.

Image: Reuters

Japan's gross domestic product (GDP) rose 0.9 percent between January and March, supporting economic recovery from six months of contraction in 2012, official data released by the Cabinet Office on Thursday showed.

As the first-quarter gain beat analysts' expectations for a 0.7 percent rise, Economics Minister Akira Amari described the growth figure as a good start into 2013.

Cabinet Office data showed that substantial growth in Japanese exports, caused by a weaker yen, boosted the GDP figure. In addition, private consumption rose 0.9 percent on the back of a Japanese stock market rally in recent months and expectations for higher salaries.

Japan's stocks have surged 70 percent since November 2012, while the national currency devalued 30 percent against the euro.

Yen weakness seen as goal of Japanese monetary policy by some

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This was the result of the pro-growth economic policy of Prime Minister Shinzo Abe, who pressed Japan's central bank into aggressive monetary easing while he increased government spending.

Dubbed "Abenomics" the policy aims to overcome years of deflation in Japan, which crimped private spending and business investment. Abe hopes to spur economic growth with higher inflation of at least 2 percent within the next two years.

Capital spending by Japanese firms in the first quarter decreased by 0.7 percent, however, highlighting that the boom has not yet fed through to the real economy. Moreover, Japan's trade deficit more than quadrupled to 362 billion yen (2.7 billion euros) compared with the same period in 2012, as the weak Yen made foreign goods more expensive.

uhe/dr (AFP, Reuters)

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