Japan boasts improved growth

November 16, 2009
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, TOKYO, Nov 16 – Japan announced on Monday its best economic growth in more than two years during the latest quarter, boosting hopes the global economy is getting back on its feet after the worst recession in decades.

The world\’s second largest economy posted a second straight quarter of positive growth as it emerges from a severe year-long recession on the back of rebounding exports and the government\’s massive stimulus spending.

The economy expanded 1.2 percent in July-September from the previous quarter — 4.8 percent on an annualised basis, the government reported. It was the best performance since January-March 2007 and about twice as fast as expected.

"Positive growth will continue in the fourth quarter," said RBS Securities economist Junko Nishioka.
"As long as fiscal stimulus effects continue and overseas demand remains stable, we think the likelihood of a double-dip in the economy is low."

Exports soared 6.4 percent quarter-on-quarter in July-September, while corporate capital expenditure rose 1.6 percent and household spending went up 0.7 percent.

The rebound follows a brutal contraction in Japan\’s export-led economy, which suffered double-digit annualised contractions in both the last quarter of 2008 and the first quarter of 2009.

Analysts said the strong growth performance was partly due to a temporary boost from corporate inventory restocking and warned the fourth quarter was unlikely to be so stellar.

"Although the GDP figure is really strong, we need to discount the positive contribution made by private inventories because it\’s not sustainable," said Kyohei Morita, chief Japan economist at Barclays Capital.

The upbeat report followed news Friday that Europe crawled out of recession in the third quarter.

Japan sank into recession in the second quarter of 2008 as the global economic downturn battered demand for its cars, electronics and other exports.

The economy returned to positive growth in April-June this year, expanding 0.7 percent quarter-on-quarter, but there are concerns the recovery could lose steam as the boost from the government\’s pump-priming efforts fades.

With the ageing and shrinking population dimming the outlook for consumer spending, Japan remains as dependent as ever on foreign markets to drive growth, although the new government has pledged to stimulate domestic demand.

Renewed deflation is seen as a threat to the recovery, with the central bank predicting three straight years of falling consumer prices.

Most data, however, have painted a picture of an economy that is slowly getting back on its feet, with the unemployment rate falling to 5.3 percent in September and factory output rising for a seventh straight month.

"Global financial markets have increasingly been showing signs of improvement, and the global economy has started to pick up," Bank of Japan governor Masaaki Shirakawa said in a speech to a financial forum Monday.

The BoJ announced last month it would wind down some of its emergency stimulus measures, but held its key lending rate at 0.1 percent and pledged to continue a highly stimulative monetary policy.

"Clearly, Japan will be the last major economy to raise interest rates," said Societe Generale\’s chief Asia economist, Glenn Maguire.

"It would be silly for the Bank to even consider raising rates over the course of 2010, unwise over the course of 2011, and most probably imprudent over the course of 2012," he added.

Masayuki Naoshima, Japan\’s minister for economy, trade and industry, apologised after leaking the GDP data to business people 30 minutes before the official release — an apparent slip-up that was described as "extremely regrettable" by chief government spokesman Hirofumi Hirano.

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