Fresh growth data prove Japan on recovery track

TOKYO - Agence France-Presse

Newly produced cars and trucks are seen at an industrial port before being loaded on a cargo ship in Yokohama yesterday. Japan’s economy bounced back from a year-end lull in the first quarter, powering ahead of other major industrial nations. REUTERS photo

Japan’s economy grew by a faster-than-expected 1 percent in the latest quarter, figures showed yesterday, as rising domestic demand and a boost in exports kept it on the recovery path. Economy Minister Motohisa Furukawa said the world’s third-biggest economy, hit hard by last year’s quake-tsunami and a surging yen, was likely to see further expansion in April-June, but warned growth could be hampered by turmoil in Europe.

Preliminary figures from the Cabinet Office showed 1 percent growth in January to March gross domestic product from the previous three months, slightly above expectations for a 0.9 percent rise.
It marked the third straight quarter of real GDP growth for Japan, also buoyed by government reconstruction spending following the devastating quake-tsunami in March 2011.

On an annualized basis, Japan’s economy grew 4.1 percent in the January to March period, the data showed, beating the 3.5 percent growth expectations.

“Our country’s economy is continuing its upward movement,” Furukawa said.

“Gradual growth is likely to continue in the April-June period and afterward, as reconstruction demand will underpin the economy,” he added. However, Furukawa also warned that “we need to be mindful of risk factors such as re-intensification in Europe’s sovereign debt crisis” amid increasing worries that debt-hit Greece will leave the 17-nation bloc. At the weekend, Prime Minister Yoshihiko Noda cited Europe as the “biggest downside risk factor for the Japanese economy” along with a strong yen, which makes exporters’ products more expensive overseas.

Worries over Europe --a key market for everything from Japanese televisions and DVD players to cars and machinery-- remain at the top of policymakers’ list of concerns.

The Japanese currency remains strong but has fallen off record highs against the dollar reached late last year.

Public investment is driver

A key driver in the quarterly growth data released Thursday was public investment, which rose 5.4 percent, amid strong reconstruction spending, while exports rose 2.9 percent on quarter.

Government subsidies for environmentally friendly cars were likely a key factor behind a boost in domestic demand, said Yasuo Yamamoto, senior economist at the Mizuho Research Institute.

“Looking forward, growth will be spurred by continued reconstruction demand and domestic demand,” he said.

On May 16, Japan’s core machinery orders fell 2.8 percent in March from the previous month, although they rose 0.9 percent in the January to March quarter from the previous three months.

Machinery orders are a leading indicator of corporate capital spending and are watched for movements that may reflect the outlook for the broader economy.