Japan's economy may have hit a bump on the road to recovery after speeding ahead in January, but data this week was unlikely to signal a steep downturn for the world's second largest economy. Surprisingly strong data in January boosted hopes for an economic rebound after the economy barely emerged from a shallow recession with near nil growth in the three quarters to December.
Although figures so far for February, such as trade, have been less than stellar, most economists still expect growth to resume, albeit modestly, in the January-March quarter. "Growth should be positive in January-March in gross domestic product terms," said Taro Saito, senior economist at NLI Research.
"However, I don't seen the underlying trend strengthening sharply."
Others said, however, that unlike recent bouts of stop-go growth, the risk of the economy falling off sharply was less likely. Takehiro Sato, an economist at Morgan Stanley, said:
The February data onslaught this week begins on Tuesday with jobs and retail sales figures, followed by industrial output on Wednesday and ending with the highly anticipated Bank of Japan's quarterly corporate sentiment survey, or tankan, on Friday. Financial markets, however, may be disappointed if they are looking for evidence of a strong rebound.
Seasonal distortions are expected to skew the data to the downside in February, particularly for consumption-related figures.
The effect of a leap year in 2004 is expected to hamper year-on-year data, particularly for retail sales because February 29 last year was a Sunday. Nation-wide department store sales fell 7.0 percent in February from a year earlier, industry data showed last week.
Results of the March tankan survey may also be a bit weaker than markets anticipate, some economists said.