Japan Economy Probably Grew Most in Almost Two Years
Japan’s economy probably grew at the fastest pace since the first quarter of 2008 as a global trade revival fueled demand for the nation’s exports.
Gross domestic product rose an annualized 3.6 percent in the three months ended Dec. 31, following a 1.3 percent expansion in the third quarter, according to the median forecast of 23 economists surveyed by Bloomberg News. The Cabinet Office report is due on Feb. 15 at 8:50 a.m. in Tokyo.
Nissan Motor Co. and Canon Inc. are among companies benefitting from stronger global demand as countries poured more than $2 trillion into their economies to spur growth. Those gains have failed to reach consumers at home, where wages are tumbling and household outlays have been propped up by government incentives that are starting to wear off.
“Japan may be able to stave off a double-dip recession given exports have done better than expected,” said Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo. “Still, it’s questionable whether a recovery in domestic demand without the stimulus is possible and the economy is still highly dependent on overseas demand, underscoring the fragility of the recovery.”
Gains in the Nikkei 225 Stock Average stalled this year after a 19 percent advance in 2009, reflecting concerns about the global recovery. The gauge rose 0.8 percent in Tokyo morning trading, paring the year’s losses to 4.8 percent. The yen was little changed at 89.70 per dollar, and has gained more than 3 percent in 2010, threatening exporters’ profits.
Sales to Asia
Asia spearheaded Japan’s revival at the end of 2009. Shipments to the region surged 31 percent in December, the fastest pace in almost a decade, helping China overtake the U.S. as Japan’s largest foreign customer on an annual basis. Demand from the U.S. is also improving after the nation’s GDP expanded the most in six years last quarter.
“The Asian economy is growing at a fast pace while the U.S. economy is picking up, a sign the global recovery is becoming more resilient,” said Yoshiki Shinke, senior economist at Dai-Ichi Life Research Institute in Tokyo.
Nissan, Japan’s third-largest carmaker, this week forecast a return to profit for the year ending March 31, citing government incentives that boosted sales in China and Japan. Canon, the world’s largest camera maker, is predicting its biggest annual profit increase in a decade amid revived global demand.
Export-Driven
Japan’s economy expanded 0.9 percent from the previous quarter, the survey showed. Overseas shipments increased 5.3 percent in the fourth quarter from the previous three months, analysts surveyed said paydayloan. Net exports, or shipments minus imports, may have added 0.5 percentage point to growth.
The Cabinet Office said last week that it will change the way it calculates exports and imports on a seasonally adjusted basis to account for the anomaly created by the financial crisis in 2008. The announcement prompted economists to cut their annualized GDP forecasts by about 1 percentage point.
The faster growth may not be enough to convince Prime Minister Yukio Hatoyama that the recovery is sustainable. The premier, facing upper house elections in July, is implementing a 7.2 trillion yen ($80 billion) stimulus package that his administration estimates can boost growth by about 0.7 percentage point next fiscal year.
More Stimulus
Even if GDP is strong, “Hatoyama may compile an additional stimulus as he wants to lure voters ahead of the election, especially when his popularity is sliding,” said Susumu Kato, chief economist at Calyon Securities in Tokyo.
Central bankers aren’t confident that growth is durable. Kazuo Momma, the Bank of Japan’s top economist, this month said “there is still a long way to go” before the expansion becomes sustainable. Governor Masaaki Shirakawa and his policy board will hold a rate-setting meeting two days after the GDP report is released.
Japan’s wages slumped at a near-record pace in December, when household sentiment fell to a six-month low. In a sign that stimulus measures are fading, retail sales fell 1.2 percent in December on a seasonally adjusted basis, the largest drop a year, as customers purchased fewer cars and appliances.
Nevertheless, consumer spending probably contributed to the growth in the fourth quarter. The 0.3 percent increase predicted by economists would be a third of the pace of the previous quarter. Capital investment may rise 1.5 percent, the first positive reading in seven quarters.
Economists including Calyon’s Kato said the business investment figure may be revised down when the government updates the GDP report next month to reflect additional data.
“The domestic economy remains fundamentally weak as the positive cyclical loop between income and expenditure has yet to kick in,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “Although we believe the worst is over for corporate earnings, the return on capital remains so low that companies will continue to restrain labor costs for some time.”
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