| Japan's economy grows in July-Sept |
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16/11/2009 17:02 (4 Day 14:43 minutes ago) | |||||
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The FINANCIAL -- Japan's economy grew more than expected in the July-September quarter, figures released by the Japanese government showed on November 16.
The world's second biggest economy grew by 1.2% in the three months from July to September - faster than economists had predicted, BBC reported. However, analysts say overall growth is likely to be sluggish for years. The global downturn had plunged Japan into its worst recession since World War II.
Gross domestic product rose at an annual 4.8 percent pace, more than the forecasts of all 20 economists in a Bloomberg News survey, after a 2.7 percent gain in the second quarter, Cabinet Office figures showed in Tokyo, according to Bloomberg. It was the second straight advance after the nation’s deepest postwar recession.
Corporate capital investment rose 1.6%, up for the first time in six quarters. Domestic demand added 0.8 percentage points to growth, Market Watch reported. Economists raised questions about the sustainability of the improved pace of growth, as the new administration led by Prime Minister Yukio Hatoyama hasn't yet implemented domestic-demand boosting measures.
"No need to pooh-pooh faster-than-expected growth. But structurally, the economy remains highly vulnerable to external demand swings, according to the same source. Capex and inventories almost certainly reflected continuing external demand recovery, the rate of which may not be sustainable," said Cantor Fitzgerald economist Uwe Parpart.
The figures are adjusted for prices and seasonal factors, The Wall Street Journal reported. The Nikkei Stock Average of 225 companies rose modestly after the report, closing up 0.2% at 9791.18
The news follows a solid growth report from the U.S. in the August-September period, and recent news that Europe has also started expanding again, according to the same source. The figures suggest a broad global recovery is underway, though worries remain about sustainability, particularly in Japan, as stimulus measures wear off.
Most economists say there is little chance of Japan's economy returning to recession, given the latest figures, BBC wrote.
Stimulus measures were credited with lifting consumer spending and capital spending rose, but analysts say growth will slow as wages stay low, the same source reported. Even though subsidies and tax breaks enacted by the previous government will remain in place until next year, an expected fall in year-end bonuses and a scarcity of jobs mean households will have less to spend.
"With weakness ahead in private consumption or public spending, a slowdown is unavoidable in the January-March and April-June quarters," Kyohei Morita, chief economist at Barclays Capital in Tokyo, told Reuters. "The one bright spot is that capital spending turned positive. However, while this signals that capital spending is starting to rise from the bottom, the size is still not enough to promise the kind of speed that would be required to prevent a slowdown in the first half of 2010," the economist added.
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