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Growth

Japan growth weaker than expected as 'Abenomics' loses steam

At the end of 2013, Japan’s economy grew at a slower pace than initially forecast, raising concerns that Prime Minister Shinzo Abe’s economic reforms are losing steam. The plan has also caused a record trade deficit.

Japan's economy had expanded at a rate of 0.2 percent between October and December, the government in Tokyo announced Monday as it revised downward its previous prediction of 0.3 percent quarter-on-quarter growth.

As a result, the growth figure for the whole of 2013 also had to be reduced from 1.6 percent to 1.5 percent, the Cabinet Office said.

In broken down figures, the government lowered the growth rate for consumer spending to 0.4 percent, as well as for capital investment, which grew by only 0.8 percent compared with an earlier estimate of 1.3 percent.

Although the new figures still mark Japan's best annual performance in three years, some analysts fear that Prime Minister Shinzo Abe's economic stimulus program is losing steam.

"The recovery in Japan lost pace in the second half of the year," said London-based consultancy Capital Economics in a statement. The group, however, also said that it would be premature to conclude that Abenomics has failed.

Abenomics getting mixed reviews after one year

Abenomics is the term widely used for the Abe government's package of economic and fiscal stimulus initiated in 2012 and aimed at jump starting weak growth in the world's third largest economy. While the government has boosted spending by trillions of yen, the country's central bank offered cheap money and low interest rates to drive down the value of the national currency.

Despite a weaker yen, exports failed to significantly pick up in 2013, forcing the downward revision of the overall growth figure for the year. Instead, the weaker currency caused Japan's trade deficit to surge to an all-time high of 1.58 trillion yen (11 billion euros) as the country's energy bills soared dramatically.

The biggest threat to Japan growth, however, is yet to come. Next month, an increase in sales tax from 5 percent to 8 percent will come into force and is expected to massively hit growth. With the move, the government aims to rein in spiraling debt.

uhe/kms (AFP, dpa, AP)

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