The Japanese economy expanded in the first quarter of 2019, rising against the analysts' expectations, who largely predicted an economic contraction during the first three months of the year. According to their recently-released preliminary reports, the gross domestic product in the land of the rising sun grew 2.1 percent in the three months to March, crushing expectations for a 0.2 percent contraction.
The main cause of the growth is the fact that Japanese imports fell faster than their exports, as imports went down 4.6 percent while exports dropped by 2.4 percent. The positive net exports added 0.4 percentage points to the GDP growth.
Thanks to this unexpected growth some analysts are now betting for a delay of a planned sales tax hike, which was set for October this year.
"Japan will press ahead with the sales tax hike scheduled for 1 October," said the senior Japan economist at Capital Economics.
The Japanese government is currently planning to raise the sales tax from 8 percent to 10 percent, concerning several policymakers who consider that the economic conditions, whether global or local are unstable. Despite having delayed the increase in the past, this time the Japanese economy minister signaled a lack of interest in doing so.
"There's no change to our view that the fundamentals supporting domestic demand remain solid," he said to reporters.
Despite the good news, it's still concerning that the most important components of the country’s GDP were negative, especially the domestic spending. This factor, together with low exports, suggests an upcoming economic recession according to some analysts.
“In the second quarter, GDP could be zero or slightly negative because exports will remain weak. This, combined with weakening capital expenditure, means there is a risk of a recession," said a senior economist at the Mizuho Research Institute.