After nearly
1 percent of economic growth in the last quarter, Japan seems to have finally
clawed itself out of recession, after a full year of contraction.
However,
analysts fear the recovery is largely due to government policy action and that
it will be difficult to keep this momentum going once stimulus packages are
stopped.
There were
encouraging signs from Europe with two of the major EU economies, France and
Germany, coming out of recession. Also, Hong Kong has come through the worst of
the crisis and is reporting growth this quarter. Overall, the world economic
news is showing that a global recovery is around the corner.
The first
positive growth in 12 months didn’t save the Nikkei from dropping over 3 percent
however, revealing the growth was not as big as traders predicted.
Japan’s
export-driven economy was dragged into recession in 2008 as global demand for
its home appliance products and cars slowed dramatically.
This led to
government intervention in the financial markets, with a stimulus injection
totalling nearly $300 billion ploughed into a flagging economy. The authorities
also brought in landmark incentives for purchasing green energy cars, and
offered cash hand-outs to certain members of the population.
Due to an
increase in demand in China in the latest mini-recovery, manufacturing firms in
Japan have benefitted, with export figures increasing 7 percent last quarter.
The future
certainly looks much rosier, even considering the poor domestic private
consumption by the nation’s ageing population, which rose less than 1 percent
despite the government’s hand-outs.
“We are
definitely seeing a positive turn-around,” says Stuart
Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management. “The
cautious and pessimistic sentiment seems to be ebbing away now and the Japanese
economy is back on the rise. It’s still a long road back to full recovery, but
it’s a start.”
“We will see how the economy fares after
the stimulus packages finish,” Poulsen added.
Japan’s economy can fluctuate wildly due to
its reliance on its export business. When last year’s crisis hit the top world
economies, the flagging demand for Japan’s products hit the country hard and it
spiralled into recession, quickly following the United States and Europe.
Any recovery in other financial zones will
be most welcome for Japan, as it would see a rise in exports to those economies
and stimulate its own growth.
The Japanese government have increased its
forecast for growth based on the encouraging news from abroad.
