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'Abenomics' keeps Japan's economy afloat

The upsurge in Japan's gross domestic product between October and December 2014 was lower than expected, but it still helps Japanese Prime Minister Shinzo Abe's strategy, or 'Abenomics, keep the economy afloat.

Japan's economy grew 0.6 per cent in the previous quarter, with an annual expansion rate of 2.2 per cent, according to data published by the country's cabinet office.

In 2014, Japan's economy grew by 0.04 per cent compared to 2013 - an upturn unanimously predicted by analysts after a sales tax hike that took effect in April 2104 led to a slowdown during the April-June and July-September quarters.

Market demand remained weak, however, with no more than 0.3 per cent growth between October-December, which has led to doubts regarding the sustainability of Japan's growth rate.

Economic Reform Minister Akira Amari said at a press conference that Japanese consumers' confidence would improve owing to a mechanism to raise the salaries in the country, which has already been put into effect.

Amari also said that the government expects a re-activation of corporate demand to occur very soon and that it would also contribute towards the economic recovery, the Kyodo news agency reported.

However, Monday's data seemed to contradict those expectations as capital investment by firms, a factor of influence in GDP calculations, did not seem quite convincing enough, growing just 0.1 per cent between October and December.

Japan's economic growth in the final quarter of 2014 was mainly due to an increase in exports, which were up 2.7 per cent, boosted by a weaker yen - making Japanese products more competitive on the world market - and the fall in global oil prices.

The progress of Japan's GDP seems to be a result of Abe's decision to cancel a second rise in the sales tax which was scheduled for 2015.

The prime minister also had used the occasion to call for early elections in December, which he won with a majority, and to justify his economic strategy.

Economists have pointed out that despite 2014 being a year overshadowed by the hike in the sales tax, economic data suggested that the government strategy might be bearing fruit after two years of large-scale monetary easing.

Analysts believe that the future of the Japanese economy depends in large measure on the long-awaited third pillar of 'Abenomics,' which consists of a series of structural reforms.

Even after two years of the Abe government, that remains more of a promise than reality.