Attempting to extend a recovery from their worst recession in decades,
Japan’s economy gained at its fastest rate for two years in the last
quarter.
The eight year downturn in Japan’s fortunes was reversed in the previous
quarter and the trend has continued, assisted by excellent export
figures and no little stimulus from the government.
The economy has been growing at double the rate experts predicted, with a
1.3 percent gain in Q2 from the previous quarter, translating to a 4.9
percent annualised figure.
“It’s nice to see Japan’s economy moving forward, it’s a good sign for
the whole region,” said Stuart Poulson, Head of Corporate trading at Nikko-Desjardins Asset Management
on his blog. “We believe Japan will avoid any second dip in its economy
this year. It’s important that international trade remains steady and
the monetary easing brought in by the government continues to have a
positive effect. We should see growth push on into Q4,” he added.
Third quarter exports leaped 6.5 percent with a significant rise also seen in household and corporate expenditure.
The recovery comes on the heels of Japan’s worst contraction in recent
years, with the export-focused economy suffering double digit annualised
contractions in the previous two quarters before the upswing.
Other analysts say we should not be getting carried away with the
figures as much of the performance can be attributed to unsustainable
corporate inventory restocking.
The data remains upbeat, however, and follows reports that the European
financial bloc has finally dragged itself out of recession in Q3.
Japan became embroiled in the worldwide recession as demand for its
major exports, cars and electronics, was substantially reduced in the
middle of 2008. The government will be hoping its stimulus package will
keep current growth expanding after the economy returned to positive
figures this year.
One major issue has been the ageing population which is shrinking
rapidly. The future hardly looks bright for consumer spending, even
though the government has promised to stimulate domestic spending with
incentives, leaving the country primarily focused on its foreign trade
to drive growth.
The Bank of Japan recently forecast 2 straight years of deflation, which
may threaten the recent recovery. Falling consumer prices will only put
more of a burden on Japan’s exports.
Poulson added, “The nation’s GDP is strong and that’s a great indicator.
There are one or two things that need to be adjusted for healthy
continued growth and I’m sure the economic authorities are well aware of
the weak spots and have a plan in mind.”
