JAPAN’S economy grew much less than initially thought in the fourth quarter last year as capital expenditure declined in a worrying sign that a rebound in consumer spending is not encouraging business investment.

    The revised fourth quarter data join a mixed batch of indicators over recent months that underscore a fragile recovery from a recession, which analysts say could pressure the Bank of Japan to inject fresh stimulus later this year to meet its inflation goal.

    The economy grew an annualized 1.5 percent in the October-December period, Cabinet Office data showed yesterday, down from a preliminary reading of an annualized 2.2 percent growth and below the median estimate for 2.2 percent growth.

    Consumer spending in the fourth quarter was revised up, showing some parts of the economy are improving. However, weak capital expenditure suggests the government’s policy mix of fiscal and monetary expansion and structural reforms have so far failed to generate a virtuous cycle of higher consumption driving corporate earnings, wages growth and business investment.

    “One reason for the disappointing capex is the shift in production overseas that has been happening for the past few years,” said Norio Miyagawa, economist at Mizuho Securities.

    “I still expect the economy to continue to grow, but the virtuous economic cycle that policymakers have been talking about really hasn’t fallen into place yet.” (SD-Agencies)