Japan pulls out of recession, but outlook shaky
Japan’s economy returned to growth in the second quarter, pulling out of its longest recession since World War Two, but analysts warned of a rocky road ahead as the nascent recovery was based on short-term stimulus efforts around the world.
The growth was mostly in line with forecasts and added to evidence that Japan was clawing back after being the hardest hit among the major economies due to its reliance on exports.
Growth in the world’s No.2 economy is likely to continue in the coming quarters as companies restock inventories due to exports and government stimulus spending around the world.
The ruling party is hoping the figures will help it ahead of an election it looks likely to lose, but political analysts said the data was unlikely to turn the tide.
Economists and policymakers were also wary about the outlook for next year as exports, the biggest contributor to April-June growth, may slow as the effect of stimulus measures wear off.
“Today’s data was driven by stimulus steps in Japan and overseas, so Japan’s economy is far from self-sustaining growth,” said Kyohei Morita, chief Japan economist at Barclays Capital.
“The growth level for the July-September quarter will likely be similar to that of April-June, and the pace of growth is expected to slow down thereafter as the effects of government stimulus run their course.”
Gross domestic product grew 0.9 percent in April-June, slightly short of a median market forecast of a 1 payday loan.0 percent increase. That puts Japan in the first camp of G7 countries that have pulled out of recession, along with Germany and France.
It compared with a 0.3 percent contraction in the United States in the same quarter. The euro zone economy shrank 0.1 percent after a 2.5 percent fall in the first three months.
The expansion, the first in five quarters, followed a revised 3.1 percent contraction in January-March and a record 3.5 percent fall in the final quarter of 2008.
On an annualized basis, it grew 3.7 percent from the first quarter, the fastest since January-March 2008.
BOJ REMAINS CAUTIOUS
Inventories cut 0.5 percentage point from GDP in April-June, more than double a 0.2 percentage-point deficit the previous quarter. This suggests inventories will contribute to growth in the July-September quarter as companies stockpile goods to meet a pick-up in demand at home and abroad, economists say.
But the rise in output isn’t likely to translate into higher corporate spending as manufacturers are still operating at around 70 percent of capacity, they say.
Bank of Japan officials who spoke to Reuters after the data weren’t very optimistic about the outlook, citing weakness in capital spending and doubts about how long the rise in consumer spending will last.
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