Slower but steady growth for Japan

Japan's economy slowed in the first quarter of 2006 from the previous quarter, but still grew faster than expected. From AFP/CNA:

Japan's gross domestic product (GDP) grew 0.5 percent in the three months to March from the previous quarter, when the economy had expanded a revised 1.1 percent, the Cabinet Office said.

On an annualized basis, GDP grew 1.9 percent, slowing from a revised 4.3 percent pace in the previous quarter...

The GDP figures were also better than market expectations for a 0.3 percent quarterly rate and a 1.2 percent annualized pace...

A slowdown in exports and consumer spending were partly behind the weaker overall growth while rising import costs on the back of rising oil prices and stronger domestic demand also took their toll...

The GDP deflator showed a slower year-on-year drop of 1.3 percent in the three months to March after a 1.6 percent decline in the previous quarter.

The Bank of Japan appears confident on the outlook for the economy, although it left interest rates unchanged yesterday.

The Bank of Japan (BoJ) has upgraded slightly its outlook for the economy while keeping its zero interest rate policy unchanged as expected and leaving its options open for the future.

"Growth is continuing with a good balance between domestic and external demand and between the corporate and household sectors," BoJ governor Toshihiko Fukui said after news of 1.9 percent annualized growth in the first quarter.

"Looking ahead, we think the economy is highly likely to continue steady growth for a long time," he told reporters Friday.

In its monthly report, the central bank tweaked the wording of its outlook, saying: "Japan's economy is expected to expand moderately".

The BoJ is not giving away much, but July looks increasingly likely to see the first rate hike.