Japan’s Economic Growth Accelerated in Fourth Quarter
Japan’s economic growth accelerated last quarter as a global trade revival fueled demand for the nation’s exports.
Gross domestic product rose at an annual 4.6 percent pace in the three months ended Dec. 31, the Cabinet Office said in Tokyo today. The median estimate of 25 economists surveyed by Bloomberg News was for growth of 3.5 percent. Third-quarter GDP was revised to zero from 1.3 percent growth.
Exporters from Tokyo Electron Ltd. to Panasonic Corp. are benefiting from the global recovery led by China, Japan’s largest overseas market. The export rebound may be too weak to shore up spending by consumers at home, where wages are tumbling and household outlays have been propped up by government incentives that are starting to wear off.
“There’s little chance that Japan will fall back into a recession because exports are likely to keep growing on the back of recoveries in China and the U.S.,” Norio Miyagawa, a senior economist at Shinko Research Institute in Tokyo, said before the report. “Yet households may face difficulties as wages aren’t increasing and deflation is entrenched.”
The yen traded at 90.16 per dollar at 9:15 a.m. in Tokyo from 90.03 before the report. The currency has gained more than 5 percent in the past six months, eroding exporters’ earnings. The Nikkei 225 Stock Average rose 0.2 percent, paring this year’s losses to 4.1 percent.
The world’s second-largest economy expanded 1.1 percent from the previous quarter, today’s report showed, more than the 0.9 percent median estimate of economists surveyed.
Exports Lead Growth
Overseas shipments increased 5 percent from the previous three months, the report said. Net exports, or shipments minus imports, added 0.5 percentage point to growth.
Asia spearheaded Japan’s revival in the fourth quarter, led by China, which grew the most since 2007. U.S. demand is also improving after the nation’s GDP expanded the most in six years last quarter. Still, a report last week showed Europe’s economy almost stalled in the period, underscoring the frailty of the world recovery.
“While stimulus effects have boosted demand globally, the Asian economies are enjoying a self-sustained recovery with a pickup in domestic demand,” said Yasuo Goto, chief economist at Mitsubishi Research Institute in Tokyo.
Panasonic, the world’s largest maker of plasma televisions, raised its operating profit forecast by 25 percent this month. Flat-panel TV sales rose 48 percent from a year earlier, driven by purchases in regions including China and South America.
Return to Profit
Tokyo Electron posited its first operating profit in five quarter amid higher orders for semiconductor equipment. The company resurrected plans to build a 25 billion yen domestic factory that it postponed because of the global recession.
Spending by consumers, which accounts for more than half of the economy, rose 0.7 percent in the fourth quarter, today’s report showed. Business investment climbed 1 percent, the first positive reading in seven quarters.
The GDP deflator, the broadest measure of price trends, fell 3 percent. Without adjusting for price changes, Japan’s economy grew 0.2 percent from the previous quarter.
Even as exports improve, Japan’s expansion may lose momentum as the effects of stimulus spending at home fade, according to Goto at Mitsubishi Research. He said that will put pressure on Prime Minister Yukio Hatoyama to unveil more measures ahead of an upper-house election in July.
Hatoyama last month gained parliament’s approval for a 7.2 trillion yen ($80 billion) package that extends incentives to purchase energy-efficient cars and appliances.
“Consumption has been sluggish if you exclude purchases of autos and flat-panel televisions, which have received a direct boost from government stimulus,” said Ryutaro Kono, chief economist at BNP Paribas in Tokyo. “Many households perceive income declines since late 2008 not just as a result of the economy’s growth cycle but as permanent declines.”
Wages have slid for 19 months, the worst streak since 2003. That has exacerbated deflation, as retailers including Aeon Co., Japan’s biggest supermarket operator, make discounts to entice shoppers. Consumer prices excluding food and energy slumped 1.2 percent in December, the biggest decline on record.
Compounding the woes from deflation, in the past month Standard and Poor’s has warned that the nation’s debt rating may be cut and Toyota Motor Corp., the country’s biggest automaker, has recalled 8 million vehicles because of accelerator and brake problems.
Bank of Japan
The Bank of Japan, amid pressure from politicians, stepped up its fight against deflation in December, saying it “does not tolerate” price declines. Governor Masaaki Shirakawa and his board will next decide policy on Feb. 17-18. They will keep the benchmark interest rate at 0.1 percent for all of 2010, according to all 17 economists surveyed by Bloomberg last month.
This week’s central bank meeting is “likely to be a non- event,” Julian Jessop, chief international economist at Capital Economics Ltd. in London, wrote before today’s report. While there’s a “compelling case” for more monetary easing, the bank will “be even more happy to sit on its hands this week following an upbeat GDP release,” he said.