Japan’s recession ends as GDP rises at 3.7% pace between April and June

Posted by: Ian Rowley on August 16, 2009

Japan’s economy is growing again. According to figures launched this morning in Tokyo, between April and June, GDP edged up 0.9% compared to three months earlier. At an annualized rate, that’s equivalent to a 3.7% clip and marks the first quarter of growth since January-March 2008. Among major economies, Japan follows France, Germany and Korea in returning to growth.

The big bounce—GDP plunged by at over 10% (annualized) in the previous two quarters—owes much to stimulus packages in Japan and around the world. Domestic spending, aided by an 8% rise in government expenditure, and earnings from exports both increased. The trend could continue: “We expect to see an acceleration in Japan’s real GDP growth rate for the July–September quarter,” Credit Suisse economist Hiromichi Shirakawa wrote in a note to clients.

Still, how long and how strong the recovery will be is hard to call. One problem for policymakers and corporate planning teams is what will happen when the impact of stimulus packages wear off. Kyohei Morita, an economist at Barclays Capital in Tokyo, reckons a soft patch early next year is more likely than another contraction. Nevertheless, companies will be wary of raising output too quickly. After all, as crisis set in following the collapse of Lehman Brothers last fall, manufacturers slashed output and laid off thousands of workers in a way not seen even following the collapse of Japan’s bubble economy in the early 1990s.

A further concern is the pace of recovery in the U.S., which remains, alongside China, the most important market for many Japanese exporters. While Japan and Europe’s big two economies are growing again, the U.S. shrank at a 1% pace during the last quarter and consumer spending remains depressed. Despite today’s return to growth, the Nikkei 225, Japan’s benchmark stock index plunged 3.1%, its biggest daily fall since March, after worse-than-expected U.S. consumer confidence figures on August 14.

Japan’s upcoming election on August 30 adds to the uncertainty. For only the second time in six decades, the Japanese electorate looks set to vote out the ruling Liberal Democratic Party. The Democratic Party of Japan, which is expected to takeover, is promising a series of measures aimed at boosting household wealth—and, hopefully, spending—but isn’t promising too much for business. Of course, today’s economic numbers won’t hurt the LDP’s chances but, with unemployment still rising, the recovery may be too late for Prime Minister Taro Aso’s government.

Reader Comments

hyunho

August 17, 2009 4:17 AM

hi

GAO Fanlin

August 17, 2009 10:18 PM

good for Japan=good for China

terry

August 18, 2009 7:33 AM

Good for every country

Vow!

August 19, 2009 1:02 AM

Japan grows 3.7% ? Impressive indeed. China must be growing 13.7% ?

coco

August 21, 2009 12:51 AM

It's always too early to say LDP will lose the game.

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Bloomberg Businessweek’s team of Asia reporters brings you the latest insights on business, politics, technology and culture from some of the world’s biggest and fastest-growing economies.

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