Japan is no longer experiencing a crisis, the economy grew with a whopping 3,5% in the last quarter

The Cabinet Office said Thursday Japan's economy enjoyed a stronger than expected recovery last quarter, growing at a 3.5 percent annual pace as the government stepped up public works spending and eased credit to encourage investment.

The Cabinet Office said Thursday Japan‘s economy enjoyed a stronger than expected recovery last quarter, growing at a 3.5 percent annual pace as the government stepped up public works spending and eased credit to encourage investment.

Manufacturing, employment improvements signal possible recovery

The economy enjoyed a stronger than expected recovery last quarter, growing at a 3.5 percent annual pace as the government stepped up public works spending and eased credit to encourage investment, the Cabinet Office reported Thursday.

The data for January to March showed the economy grew 0.9 percent on a quarterly basis, the fastest pace in a year, compared with revised 0.3 percent growth in the final quarter of 2012, as Japan inched its way out of recession.

Prime Minister Shinzo Abe took office in late December vowing to help the economy recover from two decades of deflationary malaise. His policies have helped push share prices to their highest levels in more than five years, fueled by strong liquidity and expectations of improved profitability for listed companies.

The Nikkei 225 stock index rose to 15,139.56 early Thursday before falling back slightly on profit-taking. It has gained about 75 percent since November in a rally linked to high hopes for Abe’s policies, which have been dubbed “Abenomics.”

A sharp decline in the value of the yen, brought on both by monetary easing and by expectations of further easing, has helped some exporters and provided a windfall in yen terms for companies repatriating overseas earnings. But it is also raising costs for many firms that depend heavily on imports of natural gas and other commodities.

Apart from share prices, manufacturing and employment showed slight improvements in March, buttressing hopes that the economy may be headed for a moderate recovery.

The Bank of Japan, which is committed to 2 percent inflation within two years, says it expects a moderate recovery by midyear but has warned that uncertainties in the domestic and global economies could foil those hopes.

Abe needs fast results as ammunition in the Upper House election in July, a vote that will determine his Liberal Democratic Party’s chances for pushing through with other policy priorities, including amending the war-renouncing Constitution.

Critics question whether the extra funding pumped into the economy under Abe’s strategy will foster sustainable growth or just push up prices for shares and other assets.

Key to the success of Abenomics will be increased spending by households and corporations, partly due to expectations that prices will rise. So far, increases in spending have been attributed mainly to luxury purchases by investors splashing out after seeing gains in their portfolios.

Analysts had generally forecast a 2.7 percent to 2.8 percent increase in GDP in January-March and slightly lower quarter-on-quarter growth.

Much of the growth in the first quarter came from public demand: government spending on reconstruction from the March 2011 quake and tsunami disasters and other public works. Private demand has been fueled by a recovery in housing investment, which has picked up sharply as purchasers rush to beat expected increases in the consumption tax in the coming two years.

Exports grew 3.8 percent, helped by the weaker yen and improved demand in the U.S. and other key markets.

The consumption tax increases, while needed to help reduce the massive public debt, will amount to a “major fiscal tightening,” Capital Economics economist Julian Jessop said in a commentary before the growth figures were released.

| Tags: , , , , , , , , , , , , , , , , , , , , , , , | 1 Comment

Post navigation

One thought on “Japan is no longer experiencing a crisis, the economy grew with a whopping 3,5% in the last quarter

  1. It’s a shame you don’t have a donate button! I’d definitely donate to this superb blog! I suppose for now i’ll settle for
    bookmarking and adding your RSS feed to my Google account.
    I look forward to brand new updates and will share this site with
    my Facebook group. Talk soon!

Leave a Reply

Fill in your details below or click an icon to log in:

WordPress.com Logo

You are commenting using your WordPress.com account. Log Out / Change )

Twitter picture

You are commenting using your Twitter account. Log Out / Change )

Facebook photo

You are commenting using your Facebook account. Log Out / Change )

Google+ photo

You are commenting using your Google+ account. Log Out / Change )

Connecting to %s

Create a free website or blog at WordPress.com.

%d bloggers like this: