Figures Suggest Japan’s Recovery Is Gaining Strength
By HIROKO TABUCHI
TOKYO — The Japanese economy grew at a healthy clip of 1.2 percent in the first quarter, the government said Thursday, hinting that the country’s recovery from a crippling recession was finally gathering momentum.
The expansion from the previous quarter marked the economy’s fourth quarterly gain in a row; it expanded by 1 percent in the last three months of 2009.
Economic recovery in Japan has been bolstered by a rebound in the nation’s mainstay exports of cars and electronics, which posted the fourth year-on-year rise in March. The rebound finally appears to be filtering through to domestic production and wages.
The Greek debt crisis, which has roiled global markets and caused the yen to surge against the euro, has raised some concerns that Japanese exports might suffer. A strong yen hurts Japanese exporters because it makes their products more expensive overseas, and their foreign-currency earnings are worth less when converted into yen.
Japan will “continue to experience an upward momentum for the time being,” Hirokata Kusaba, senior economist at the Mizuho Research Institute in Tokyo, said in a note Thursday after the economic growth figures were released.
However, idled production facilities and still-sluggish employment meant that “should overseas demand run out of steam, we cannot necessarily be optimistic that private demand will support a self-sustaining recovery,” Mr. Kusaba said.
The 1.2 percent quarterly growth rate in the January through March period translates into an annualized growth rate of 4.9 percent.
The latest numbers exceeded an annualized 3.2 percent growth rate in the U.S. economy in the first quarter, though it missed a median forecast of 5.5 percent by 21 economists polled by Bloomberg News.
Private consumption, which makes up about 60 percent of the economy, grew 0.3 percent in the quarter, while exports rose 6.9 percent.
The latest figures “reflect the stable recovery of the economy,” Naoto Kan, the finance minister, said Thursday. But he said persistent deflation and market turmoil posed risks for Japan’s growth prospects.
Economists warn that any moves by the Chinese government to control inflation following breakneck economic growth could also undermine Japan’s exports and economic recovery.
And domestic consumption may again slump once the government starts phasing out various stimulus measures, analysts say.
A renewed focus on fiscal discipline in Japan after the Greek debt crisis, which forced a European bailout of almost $1 trillion, may also crimp the government’s appetite for more stimulus spending.
Prime Minister Yukio Hatoyama will unveil a strategy next month to tackle Japan’s gross public debt, which is more than double the size of its gross domestic product. But Japan has averted a crisis of confidence in its debt so far because domestic investors hold the bulk of government bonds.
Benchmark 10-year yields on Japanese government bonds have remained significantly lower than yields on U.S. Treasury securities.
Japan’s recovery had been marred by fits and starts following an annualized 13.7 percent fall in G.D.P. in the first quarter of 2009, the country’s deepest contraction since World War II.
The economy expanded by 1.8 percent the following quarter, but growth slowed to a mere 0.1 percent in the July-to-September period last year, raising concerns among domestic policy makers of a double-dip recession.
The International Monetary Fund estimated that Japan’s economy shrank 5.2 percent in 2009, compared with 2.4 percent in the United States and 4.1 percent in the euro zone that year.
Fears of another recession have eased in Japan, however, as exports, production and wages stage a recovery.
Exports have been bolstered by a rise in demand from China, which has lifted profits at companies like Toyota Motor and Sony. Industrial production rose 6.7 percent in the January-to-March period from the previous quarter — the fourth consecutive quarter of growth — while monthly wages rose by 0.8 percent in March from the same month last year, their first gain in 22 months.
Private spending has been supported by a flurry of stimulus measures introduced by the government, including tax breaks on fuel-efficient cars, subsidies for eco-friendly electronics and cash payments for families with young children. The stimulus helped retail sales advance for three straight months through March.
“An improvement in employment and income will likely become more evident as corporate activity becomes more vibrant, and the pace of growth in private consumption and housing investment is likely to accelerate,” Bank of Japan said in an outlook released April 30.
The Asia-Pacific region has seen a broad recovery from the global financial crisis, with data released Thursday showing that Singapore’s economy had expanded at an annualized rate of 38.6 percent in the first quarter from the fourth quarter and 15.5 percent from the year-earlier period. Also Thursday, Taiwan reported that its first-quarter G.D.P. grew at the annualized seasonally adjusted rate of 11.3 percent, and 13.1 percent from the year-earlier period.
The latest growth numbers in Japan come as Mr. Hatoyama’s public-appeal ratings have plunged before nationwide parliamentary elections that are due later this year.
Japan’s preliminary G.D.P. readings have also been subject to significant revisions in the past, however. The government’s initial estimates are calculated using supply-side numbers and are later updated based on demand data.