Japan’s solid economic growth in the first quarter of 2013 provided a quick pay-off from Prime Minister Shinzo Abe’s aggressive cranking of the fiscal and monetary policy levers at his disposal. It is also the sort of instant gratification that could play well for Mr Abe in elections this July. Whether he has ended Japan’s poor growth spell for good, however, is doubtful.
The growth spurt – at an annualised rate of 3.5 per cent – is welcome for its own sake and for what it promises for the near future. Private consumption accounted for more than half of the new demand – net exports and public spending drove the rest. This suggests “Abenomics” is having an effect. Mr Abe’s fiscal loosening and campaign for more aggressive monetary action bore fruit even before Haruhiko Kuroda, the new BoJ governor, unveiled the policy.
That means another good quarter may follow as the scale of Mr Kuroda’s commitment makes itself felt alongside the plummeting yen. Mr Kuroda intends to double the money supply in two years and insists inflation will go up to 2 per cent per year.