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May 19, 2019, 8:58 p.m. EDT

Japan's strong Q1 growth surprises economists

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By Megumi Fujikawa

TOKYO--The Japanese economy grew a better-than-expected annualized 2.1% in the first quarter of 2019, overcoming uncertainties in the global economy including the U.S.-China trade dispute.

Most economists had forecast that the figure for the January-March quarter would be flat or slightly negative.

The growth data showed some impact from the trade frictions in Japan, the world's third-largest economy after the U.S. and China. Capital expenditures declined an annualized 1.2%.

"Due to the slowdown in the overseas economies, mainly in China, sentiment among Japanese companies especially manufacturers, as well as households, is becoming more and more cautious," said a Cabinet Office official.

Public investment rose an annualized 6.2% in the quarter following a decline the previous quarter. That helped overcome the slowdown in private investment.

The government is set to give its latest assessment of the economy later this month. That could influence Prime Minister Shinzo Abe's decision on whether to go ahead with a sales tax increase to 10% from 8% scheduled for October.

In its April assessment, the government said the Japanese economy "is recovering at a moderate pace while weakness is seen recently in exports and industrial production in some sectors."

Write to Megumi Fujikawa at megumi.fujikawa@wsj.com

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