TOKYO: Japan’s economy escaped recession last quarter but grew less than first estimated as demand and wages remained weak, the government said on Monday.

The world’s third-largest economy is recovering from a blow to consumer and business spending from a sales tax hike on April 1, 2014. Purchases plunged after surging to beat that increase.

The government said the economy grew an annualised 1.5 per cent in the final quarter of 2014 compared with its earlier estimate of 2.2pc growth. It contracted 2.6pc in the July-September quarter and 6.4pc in the April-June quarter.

For all of 2014, Japan’s economy stagnated, neither growing nor contracting from the previous year.

Monday’s revision reflects lower private demand, flat-lining corporate and residential investment and a downward revision to business inventories. It also showed a slight drop in incomes.

More recent data have shown a recovery in exports and increased orders of machinery, which are vital drivers for growth. Both the government and central bank say the economy is still in the midst of a moderate recovery.

“The economy is growing. Wages are growing. Only the shock of untimely consumption taxes is hampering growth,” Koichi Hamada, a Yale University economist and adviser to Prime Minister Shinzo Abe, told reporters last week.

“There is a rosy future for the Japanese economy.” The central bank is spending trillions of yen (tens of billions of dollars) a month on asset purchases, seeking to spur inflation and end once and for all chronic deflation that Hamada and some other economists say is slowing growth.

As the US wraps up its era of so-called “quantitative easing,” Europe and Japan are still counting on it to help spur growth.

But falling oil prices and relatively weak domestic demand have slowed Japan’s progress toward its goal of a 2pc inflation rate.

Extreme monetary easing has been the linchpin of the “Abenomics” economic revival strategy, along with strong government spending and sweeping reforms.

Progress in those areas has also been modest, with government spending rising 0.1pc in the last quarter from the year before.

Published in Dawn March 10th , 2015

On a mobile phone? Get the Dawn Mobile App: Apple Store | Google Play