JAPAN’S economy expanded at the fastest pace in a year in the first quarter, thanks in part to a leap year consumption boost, but analysts say the rebound was not strong enough to dispel concerns over a contraction in this quarter.

    With private consumption making only a feeble recovery from last quarter’s slump, the data keep alive market expectations that Prime Minister Shinzo Abe will delay a scheduled sales tax hike next year, analysts said.

    The world’s third-largest economy expanded by an annualized 1.7 percent in the January-March period, much more than a median market forecast for a 0.2 percent increase and rebounding from a 1.7 percent contraction in the previous quarter, Cabinet Office data showed yesterday.

    Analysts had worried that the January-March period would not produce enough growth to avert recession, defined as two straight quarters of contraction, after stripping out the estimated boost from the leap year.

    “Taking into account the effects of the extra day from the leap year, which pushed up the quarter-on-quarter growth rate by 0.3 percentage point, growth is not as strong as the headline number shows,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

    “The GDP data will likely press Abe to decide to delay a planned sales tax hike next year and to roll out additional fiscal stimulus worth at least 5 trillion yen (US$45.76 billion). I also expect the Bank of Japan to ease policy further in July given weak growth and tame inflation.”

    Private consumption, which makes up 60 percent of GDP, rose 0.5 percent, more than double the median market forecast, as households boosted spending on televisions, food and beverages, and recreation, the data showed. But the rebound failed to make up for a 0.8 percent drop in the previous quarter. (SD-Agencies)