Japan's Economic Growth Accelerates in 4th Quarter, but Future Prospects Are Murky.
Japan's economy grew at a surprisingly strong annual rate of 3.7 percent in the fourth quarter, the government said Thursday, but analysts and ministers warned prospects for the future remain murky.
The main driver for growth during the October-December period was a jump in corporate capital investment, which rose 2.9 percent from the previous quarter. "Business investment was awesomely good," said Tomoyuki Ohta, senior economist at Mizuho Research Institute in Tokyo.
The figures show Japan's gross domestic product growth accelerated from the July-September quarter, when growth slowed to a 1.3 percent annual pace -- or the rate of growth for a full year at that quarterly pace.
That's good news for a country worried that a slowdown in the U.S. economy, which grew an anemic 0.6 percent in the fourth quarter, would sap demand for Japanese goods. Exports surged 2.9 percent from the previous quarter.
The GDP report showed that consumer spending was relatively weak in the fourth quarter, increasing 0.2 percent on quarter, but analysts said that showed it was holding up despite a recent decline in wages. Still, a slump in the U.S., which has been battered by problems in its housing and credit markets, could have a ripple effect across Asia and hurt Japan's growth later this year, analysts say.
Japan, the world's second-largest economy, was unlikely to maintain the strong growth pace seen in the latest results, said Societe Generale chief Asia economist Glenn Maguire. "We really only saw financial stresses in the second half of 2007," he said. "We haven't moved into the period where that has started to morph into more generalized economic weakness."
Mizuho's Ohta said he perceived the direct risks to Japan from the U.S. credit crisis were minimal, but projected the Japanese economy would grow at a moderate 1 percent pace for several months.
Finance Minister Fukushiro Nukaga acknowledged worries remain, such as high material costs and unstable financial markets. "There are factors for concern," he told reporters. Compared to the previous quarter, GDP rose 0.9 percent. That was better than the 0.3 percent gain -- or 1.4 percent annualized growth -- forecast by economists surveyed by Dow Jones Newswires.
"The GDP data have confirmed the Japanese economic recovery is continuing," said Economy Minister Hiroko Ota. "But I'm aware that downside risks, such as housing investment and the U.S. economy, are increasing."
December economic data was mixed. Household spending rose a stronger-than-expected 2.2 percent from the same period the previous year, but retail sales inched up just 0.2 percent. The jobless rate was flat at 3.8 percent, while industrial production rose 1.4 percent from November and is expected to decline in January and February.
The Bank of Japan's policy board began a two-day meeting Thursday, and investors widely expect the central bank to keep interest rates unchanged at 0.5 percent. UBS Securities Japan economist Takashi Omori noted that Japan's outlook isn't rosy, pointing to signs of weakening in production and consumer sentiments. "Given the current conditions, it's unlikely that such strength will continue into the next quarter," he said.
Japan's economy grew at a surprisingly strong annual rate of 3.7 percent in the fourth quarter, the government said Thursday, but analysts and ministers warned prospects for the future remain murky.
The main driver for growth during the October-December period was a jump in corporate capital investment, which rose 2.9 percent from the previous quarter. "Business investment was awesomely good," said Tomoyuki Ohta, senior economist at Mizuho Research Institute in Tokyo.
The figures show Japan's gross domestic product growth accelerated from the July-September quarter, when growth slowed to a 1.3 percent annual pace -- or the rate of growth for a full year at that quarterly pace.
That's good news for a country worried that a slowdown in the U.S. economy, which grew an anemic 0.6 percent in the fourth quarter, would sap demand for Japanese goods. Exports surged 2.9 percent from the previous quarter.
The GDP report showed that consumer spending was relatively weak in the fourth quarter, increasing 0.2 percent on quarter, but analysts said that showed it was holding up despite a recent decline in wages. Still, a slump in the U.S., which has been battered by problems in its housing and credit markets, could have a ripple effect across Asia and hurt Japan's growth later this year, analysts say.
Japan, the world's second-largest economy, was unlikely to maintain the strong growth pace seen in the latest results, said Societe Generale chief Asia economist Glenn Maguire. "We really only saw financial stresses in the second half of 2007," he said. "We haven't moved into the period where that has started to morph into more generalized economic weakness."
Mizuho's Ohta said he perceived the direct risks to Japan from the U.S. credit crisis were minimal, but projected the Japanese economy would grow at a moderate 1 percent pace for several months.
Finance Minister Fukushiro Nukaga acknowledged worries remain, such as high material costs and unstable financial markets. "There are factors for concern," he told reporters. Compared to the previous quarter, GDP rose 0.9 percent. That was better than the 0.3 percent gain -- or 1.4 percent annualized growth -- forecast by economists surveyed by Dow Jones Newswires.
"The GDP data have confirmed the Japanese economic recovery is continuing," said Economy Minister Hiroko Ota. "But I'm aware that downside risks, such as housing investment and the U.S. economy, are increasing."
December economic data was mixed. Household spending rose a stronger-than-expected 2.2 percent from the same period the previous year, but retail sales inched up just 0.2 percent. The jobless rate was flat at 3.8 percent, while industrial production rose 1.4 percent from November and is expected to decline in January and February.
The Bank of Japan's policy board began a two-day meeting Thursday, and investors widely expect the central bank to keep interest rates unchanged at 0.5 percent. UBS Securities Japan economist Takashi Omori noted that Japan's outlook isn't rosy, pointing to signs of weakening in production and consumer sentiments. "Given the current conditions, it's unlikely that such strength will continue into the next quarter," he said.
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