JAPAN: Economy grows but Tokyo remains cautious

Record ID: 465130

  • Title: JAPAN: Economy grows but Tokyo remains cautious
  • Date: 16th February 2010
  • Summary: TOKYO, JAPAN (FEBRUARY 15, 2010) (REUTERS} VARIOUS PEOPLE CROSSING STREET IN FRONT OF TOKYO STATION
  • Embargoed: 3rd March 2010 12:00
  • Keywords:
  • Location: Japan
  • Country: Japan
  • Topics: Economic News
  • Reuters ID: LVA3LYK7MTBI9VLYYZ0LWD0W14F2
  • Story Text: Gross Domestic Product (GDP) figures released on Monday (February 15) showed Japan's economy grew faster than expected in the fourth quarter, spurred by a rebound in domestic demand and corporate investment, but the fading impact of government spending likely points to a slowdown in 2010.
    But the government is unlikely to take much comfort in the 1.1 percent quarterly GDP rise because few economists expect growth to increase rapidly as an ageing population, falling wages and a large gap between supply and demand push down prices.
    That leaves Japan's policy-makers facing a question they so far haven't answered convincingly, which is how to achieve high growth when the huge national debt limits its ability to pump-prime the economy and when the central bank has exhausted its conventional monetary policy options.
    In a sign of deepening deflation, the GDP deflator, a broad gauge of price trends, fell a record 3.0 percent in October-December from a year earlier, data released by the Cabinet Office showed on Monday.
    The Democratic Party-led government's policies shifting money away from public works projects and into spending for households, which has a less direct boosting effect on the economy, is also expected to slow growth in the short run.
    Japan's top government spokesman said that the nation's growth figures improved in October-December, but acknowledged the situation remained severe.
    "We still think the economy and its trend remain severe," Chief Cabinet Secretary Hirofumi Hirano told a regular news conference.
    "We must make sure Japan doesn't fall into a double dip recession," he said.
    Economists say there is little chance Japan will fall back into recession as an expected acceleration in exports and government payouts to households with children in the second half of this year should underpin growth.
    The fourth quarter growth was the fastest since a 1.3 percent expansion in April-June 2009. Revised data showed Japan's economy ground to a halt in July-September.
    The increase last quarter was bigger than a median market forecast for a 0.9 percent rise, and translated into an annualised rise of 4.6 percent, beating a 3.7 percent forecast.
    The U.S. economy grew at an annualised clip of 5.7 percent in the same quarter, while the euro zone economy expanded 0.1 percent on the quarter.
    ENDS.
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