Japan Economy Grows More Than Initial Estimate

Japan’s economy expanded more than the government initially estimated in the first quarter, adding to evidence that the world’s third-largest economy will sustain its recovery this year.

Gross domestic product grew an annualized 4.7 percent in the three months ended March 31, the Cabinet Office said in Tokyo today, compared with a preliminary estimate for a 4.1 percent expansion. The median forecast of 18 economists surveyed by Bloomberg News was for 4.5 percent growth.

The report includes an upward revision to private demand, signs that the domestic economy is recovering as rebuilding from last year’s earthquake kicks in and government incentives for buying fuel-efficient cars boost consumption. At the same time, Japan is at risk from a deepening European debt crisis that is spurring gains in the yen that could weigh on profits of exporters.

“Domestic demand will probably remain on a recovery trend as the effects of the government’s measures and public investment for rebuilding” are likely to carry into the third quarter, said Yoshiki Shinke, chief economist at the Dai-Ichi Life Research Institute in Tokyo, said before the report. “Yet, there are clouds on the horizon as the downside risks from overseas factors are rising.”

A rebound in demand in Japan and the U.S. has prompted automakers such as Toyota Motor Corp. (7203) and Nissan Motor Co. (7201) to forecast higher profits. Toyota said on May 9 predicted profit will more than double to a five-year high. Nissan also forecast on May 11 that profit will rise to the highest in five years.

The United States, Japan’s second largest trading partner, announced in May that the economy grew an annualized 1.9 percent during the first quarter.

To contact the reporter on this story: Keiko Ujikane in Tokyo at kujikane@bloomberg.net

To contact the editor responsible for this story: Paul Panckhurst at ppanckhurst@bloomberg.net

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