Tue, Feb 17, 2015 - Page 15 News List

Japan expands, but less than expected

FRAGILE GROWTH:While Tokyo beat recession, last quarter’s disappointing 2.22 percent rise failed to allay fears as falling wages undermine consumer confidence

NY Times News Service, TOKYO

A man yawns in front of a share prices board in Tokyo yesterday.

Photo: AFP

Japan emerged from recession at the end of last year, government data showed yesterday, though the surge of economic growth — the country’s first since early last year — was weaker than experts had forecast.

In a preliminary report, the Cabinet Office said GDP expanded at an annualized rate of 2.2 percent in the quarter through December. The economy had contracted in each of the two previous quarters, a downturn widely blamed on higher taxes.

However, the return to growth was less decisive than experts had predicted and may fail to erase concerns that the economy remains fragile despite a two-year stimulus campaign initiated by Japanese Prime Minister Shinzo Abe. Economists surveyed by news agencies had forecast an expansion of 3.7 percent on average.

Since he returned to power at the end of 2012, Abe has been trying to inject life into the economy through a set of pro-growth policies known as Abenomics. Much of the work has been carried out by the Bank of Japan, which is creating money on a vast scale by buying government bonds and other assets.

The bank’s measures are keeping borrowing costs extremely low — an invitation for more spending and investment. They are also holding down the yen’s exchange rate, which helps big manufacturing companies like Toyota and Hitachi that sell large quantities of their products in foreign markets. The stock market is up and corporate profits are at record highs.

“Consumer confidence appears to be improving, and looking ahead I think we can be hopeful,” Japanese Minister of Economy, Trade and Industry Akira Amari said at a news conference.

Given the support provided by Abenomics, that Japan nonetheless fell into recession last year was a surprise and a worry. A long-planned increase in the national sales tax, carried out in April, hit consumers harder than the government and most economists had expected, calling the effectiveness of Abe’s approach into question. Wages are still falling, adjusted for inflation, and many workers feel left out.

The economy did not grow at all last year, with two quarters of recession almost exactly canceling out two quarters of expansion, according to yesterday’s report.

Growth in the two years since Abe began his campaign has added up to a modest 1.6 percent, slightly less than the 1.8 percent rate recorded in 2012, the year before he took office.

However, economists say this year could be a more forgiving year for Abenomics. Abe has postponed a second increase in the sales tax, hoping to avoid a fresh blow to consumer confidence.

And the weaker yen has begun to spur domestic manufacturing by increasing the demand for exports from Japan. Tourism is also booming, as once prohibitively expensive Japanese cities start to look cheap to travelers from countries with stronger currencies.

“Going forward, we expect the Japanese economy to trace a moderate recovery path,” Goldman Sachs chief economist Naohiko Baba said.

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