Jan.-March GDP upgraded to annual 6.7% rise on brisk capital spending

Japan's economy grew an annualized 6.7 percent in real terms in the first quarter of 2014, much higher than a 5.9 percent increase in preliminary data, as corporate capital spending was stronger than initially estimated, the government said Monday.

The result signaled that companies are not so wary of the economic outlook despite concern that the 3-percentage-point sales tax hike to 8 percent implemented April 1 could hurt consumption and investment.

The January-March expansion in inflation-adjusted gross domestic product -- the total value of goods and services produced at home -- translated into a 1.6 percent increase on quarter, upgraded from an initially estimate of a 1.5 percent rise, the Cabinet Office said.

"We were able to achieve the economic growth rate that we haven't heard of recently," Prime Minister Shinzo Abe said during a parliamentary session Monday.

Corporate capital spending, which Abe's Cabinet sees as the key for boosting the economy, jumped 7.6 percent from the previous quarter, upgraded from a 4.9 percent increase in the preliminary report released May 15.

Private consumption -- accounting for roughly 60 percent of Japan's GDP -- was also upwardly revised to a 2.2 percent rise from 2.1 percent growth.

Abe has pledged to prevent the tax hike from hurting the economy by implementing a 5.5 trillion yen economic stimulus package and 1 trillion yen in tax cuts aimed at shoring up investment and encouraging companies to increase wages.

The world's third-largest economy, however, is expected to contract sharply in the April to June period due to weak personal consumption after last-minute buying ahead of the consumption tax hike.

The government-affiliated Japan Center for Economic Research said last week that Japan's GDP is estimated to contract 4.2 percent in the second quarter, citing the average projection of 41 private-sector economists.

But Masahiko Hashimoto, economist at the Daiwa Institute of Research, expressed an upbeat view about the future course of the economy, saying capital spending as well as an expected growth in exports -- especially those to the United States -- will likely support the economic recovery.

"Consumption is projected to fall back (in the second quarter), but the negative impact of the tax hike on business activities seems to be relatively small," Hashimoto said.

In the government's revised report for the January-March period, exports and imports grew 6.0 percent and 6.3 percent, respectively, both unchanged from the initial data.

Public investment was downgraded to a 2.7 contraction from a 2.4 percent decrease, but it is expected to increase down the road under the government's policy to boost the economy with fiscal spending.

In nominal terms, or unadjusted for price changes, Japan's economy grew 1.4 percent on quarter, revised upward from an initially estimated 1.2 percent.