Abenomics starts to bear fruit

Japan’s economy grew at an annualised pace of 3.5% in the first quarter of 2013, preliminary data shows, indicating that Abenomics may be starting to work.

The bold monetary and economic policies of Prime Minister Shinzo Abe may be starting to bear fruit after Japan posted a robust economic performance over the first quarter of the year. Recently released government figures show the economy expanded by 0.9% for the January to March period compared with a year ago, driven by higher household consumption and exports. That beats market expectations of 0.7% for the quarter, or 2.8% for the annualised pace.

The solid growth is an indication that the world’s third-largest economy is at the beginning of a long-awaited turnaround, after posting disappointing rates in the previous two quarters. Economics Minister Akira Amari said it was a sign that the Abe administration’s economic policies are "starting to show results", with the Prime Minister using what has been called a "three-arrowed bid" to lift Japan out of its long deflationary slump.

The devaluation of the yen has clearly had a positive impact on exports, and more fiscal spending has injected more energy into the economy. Structural reforms to make the country more competitive have also been crucial, making Japan’s  labour market more flexible and lowering barriers to trade.

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