Japanese Economy May be Stabilizing


Recent data updates are showing that the Japanese economy may be slowly recovering. In the first three months of 2013, the GDP expanded 0.9 percent from the previous quarter and 0.2 percent from the same period in 2012. More importantly, expansionary policy mix of monetary and fiscal stimulus initiated at the beginning of 2013 is likely to boost much needed growth in the next few months.

Indeed, in January, Prime minister Shinzo Abe had announced 10.3 trillion yen stimulus to pull the world’s third largest economy out from a prolonged deflation. The government had estimated that this extra spending will increase GDP by about 2 percentage points and create about 600,000 jobs. Also, in April, the Bank of Japan had initiated a new program of quantitative monetary easing in order to fight deflation, falling exports and an investment slump. As a result, the Japanese Yen had depreciated sharply benefitting big exporters. Also, the confidence among investors has been growing, the Nikkei 225 up 59 per cent in six months. To make things even better, the consumer confidence is on the rise and in March, large retailers posted their biggest gains in 20 years.


After two quarters of contraction, the GDP expanded 0.3 percent in Q4 of 2012 and 0.9 percent in Q1 of 2013. In the first four months of 2013, the consumer confidence has been at the highest level since 2007.
 
The Tankan index of sentiment at large manufacturers improved slightly in the first quarter. Yet, industrial production recovery still seems to be out of reach as it declined 6.7 percent yoy in March.
     

In March, exports rose 1.1 percent yoy to 6.271 trillion yen, after dipping 2.9 percent in the previous month. Japan's trade deficit more than quadrupled yoy as a weaker yen inflated import costs.
 
In April, the Bank of Japan announced further measures to fight systemic deflationary pressures. Indeed, year-over-year inflation rates have been negative for the last seven months.

 

 



Anna Fedec, anna@tradingeconomics.com
5/16/2013 8:41:07 AM