Japan GDP Growth Accelerates

Japan’s economy expanded at the fastest pace in more than two years in the third quarter, led by a rebound in domestic demand that may ease concern of a return to recession next year.
TradingEconomics.com, Bloomberg 11/16/2009 9:11:54 AM

Gross domestic product rose at an annual 4.8 percent pace, after a 2.7 percent gain in the second quarter, Cabinet Office figures showed. It was the second straight advance after the nation’s deepest postwar recession.

Faster expansion of the world’s second-largest economy underscores a strengthening global recovery, after reports last week showed accelerating Chinese industrial production and a return to growth in the euro region. At the same time, Japan’s policy makers need to maintain monetary and fiscal stimulus to buttress the rebound, Deputy Prime Minister Naoto Kan said.

From the previous quarter, the economy grew 1.2 percent in the three months ended Sept. 30. Domestic demand accounted for more than half of the increase.

Without adjusting for prices, the economy shrank an annualized 0.3 percent, the sixth straight contraction.

Capital spending climbed 1.6 percent, more than three times the pace projected by analysts, after its longest rout since at least 1980. Business investment accounts for about 15 percent of the economy and drove more than a third of Japan’s growth between 2002 and 2007.

One third of Japan’s factories still sit idle, forcing firms to delay hiring and investment that would help to sustain the revival.

Consumer spending, which makes up about 60 percent of the economy, climbed 0.7 percent, fueled by government incentives to purchase energy-efficient cars and appliances.

Hatoyama’s Democratic Party of Japan inherited policies that helped prop up spending at home at the cost of increasing a debt that’s approaching double the size of GDP. The DPJ itself pledges to boost spending and cut taxes, even as tax revenue declines, raising concern that Japan’s fiscal position will deteriorate further.

Japan’s expansion since March doesn’t make up the ground lost during the previous four quarters of contraction, when the economy shrank to its 2003 size. Industrial production is still about 20 percent below last year’s level and the slump in domestic demand has depressed consumer prices, which have dropped for seven months.

Japan GDP Growth Accelerates