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Tuesday, Nov. 17, 2009

Economy grew 4.8% in latest quarter

But future hazy as stimulus steps dry up

Staff writer

The economy grew an annualized 4.8 percent in the July-September period, marking the second straight quarter of growth amid stronger consumption and exports, the government said Monday.

It was the best performance since 5.7 percent growth was logged in January-March 2007.

Private consumption rose 0.7 percent from the previous quarter and private investment increased 1.6 percent, according to the Cabinet Office's closely watched quarterly report. Exports surged 6.4 percent, the same pace as during the April-June quarter.

"The results were much stronger than our expectations," said Takuji Aida, senior economist at UBS Securities Japan.

Private inventory pushed up the GDP figure by 0.4 percent in the July-September period, compared with minus 0.4 percent in January-March and minus 0.7 percent in April-June, the report said.

Inventories dropped in the previous two quarters but rebounded this time, Aida said.

The strong GDP growth was due to the stimulus package compiled by the previous administration, which boosted domestic consumption, as well as steady exports, said Minoru Nogimori, an economist at Nomura Securities Co.

"An export-led recovery and the government's stimulus policies brought multiplier effects," Nogimori said.

Economists, however, are split on next year's outlook.

Aida said the economy will continue to grow because the government is expected to keep spending and implementing employment steps.

"As the economy will continue to be supported by (stimulus policies of the current government), the risks of a double-dip in around the first half of next year have diminished," he said.

Nomura's Nogimori was less optimistic, saying economic growth will probably plunge to around zero early next year.

While the economy will continue to grow at a slower pace in the October-December quarter amid a strong world economy and exports, Nogimori predicted the figure will fall to around zero around early next year. Employment and investments will weaken in Japan as the global economy is expected to slow around that period, he said.

Nogimori urged the Bank of Japan to maintain its monetary policy to prevent the economy from sinking again.

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The Japan Times

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