Japan's economy avoids recession

TOKYO — Japan managed to sidestep a recession after its economy grew in the first quarter, preliminary data showed on Wednesday, but efforts to cement recovery in the world's number three economy were gaining little traction.

Japan's gross domestic product (GDP) expanded by 0.4 per cent between January and March — or 1.7 per cent at an annualised rate — after a contraction in the last quarter of 2015.

A consumer spending rebound helped drive the better than expected figures, but the leap year added another day of production — and spending — to the economy's performance.

In January, Japan's central bank shocked markets with a negative interest rate policy, designed to boost lending to people and businesses.

Back then, the move was widely criticised as a desperate bid to prop up Tokyo's faltering economic plan.

However, the fresh data is not expected to do much in terms of buoying hopes for Japanese Prime Minister Shinzo Abe's faltering growth blitz.

His bid to revive Japan's once-soaring economy, dubbed Abenomics, was shaken by a bloodbath on equity markets at the start of the year and a resurgent yen which has taken a bite out of Japan Inc.'s profits.

Local media have suggested that Abe will delay plans to raise Japan's consumption tax over concerns that the step may harm the country's already fragile economy.

But Abe on Wednesday insisted his growth plan was making headway, and that no final decision has been made on the levy increase.

"I will make the appropriate decision at an appropriate time," he told reporters.

A consumption tax rise in 2014 — seen as key to helping pay down Japan's enormous national debt — was blamed for ushering in a brief recession.

This week the government approved a 778 billion yen, an equivalent of $7.1 billion extra budget in response to April's deadly earthquakes, which prompted factory shutdowns in southern Japan. 

"But even if the government delays the tax hike, it still needs to set a course for getting public finances on a sound footing, which is not an easy job," said Yoko Takeda, on economist at the Mitsubishi Research Institute.

"The economy is in a tough situation with the strong yen hurting corporate earnings, stalled wages and a lack of confidence among consumers. There are going to be some tough times ahead."

Wednesday's figures came days before the meeting of the Group of Seven finance chiefs that Japan is scheduled to host, followed by a summit of their leaders next week.

 The group will chiefly look into ways to kickstart global growth.