People cross a street in the Shinjuku shopping and business district in Tokyo, Japan. Photo: Reuters / Toru Hanai
People cross a street in the Shinjuku shopping and business district in Tokyo, Japan. Photo: Reuters / Toru Hanai

Japan’s economy grew at a much slower pace in the first quarter than estimated, the Cabinet Office said, but analysts said it was a “one-off” adjustment in oil inventories that would not derail recovery.

The world’s third largest economy expanded at an annualised rate of 1% in the first quarter, less than half the 2.2% estimate, Cabinet Office data showed on Thursday.

A recent run of export and factory output indicators suggest the economy is expanding in the current quarter, although wage growth and household spending remain lacklustre, despite a tight job market.

The Bank of Japan is expected to stand pat at its next rate review on June 15-16, although a majority of the economists in a Reuters poll last month forecast the BOJ’s next move would be to reduce its stimulus.

The GDP data was revised as crude oil inventory levels at the end of March were the lowest since 2000, Cabinet Office officials said, because some refineries were offline for repairs.

“The data is not as bad as the headline figure appears. It supports the BOJ’s upbeat view on the economy,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

“Excluding the revision to inventory, private final demand including capital expenditure was strengthening, suggesting that export-led recovery is broadening gradually.

On the quarter, the Japanese economy grew a revised 0.3 percent in real, price-adjusted terms, against a preliminary reading of a 0.5 percent increase and the median estimate of a 0.6 percent expansion.

Capital expenditure, a key component of GDP, rose 0.6 percent for the quarter, outstripping the preliminary estimate of a 0.2 percent increase.

Inventories shaved 0.1 percentage point off growth, revised down from a 0.1 percent point contribution originally posted.

Private consumption, which accounts for roughly 60 percent of GDP, rose 0.3 percent, down from the preliminary 0.4 percent gain. Tame wages and consumer spending have kept Japan from beating deflation, posing a key challenge for the BOJ in meeting its 2 percent inflation goal via a massive bond-buying programme.

Taken together, government, business and household demand contributed 0.1 percentage point to growth, versus the initial 0.4 percentage point recorded. Net exports added 0.1 point to growth, unchanged from the preliminary estimate.