Japan’s economy is on the road to a sane recovery at a slower than expected 0.8 percent annualized rate seen in the April-June period, the Cabinet Office said Friday.
Gross domestic product grew a real 0.2 percent during the period compared to previous quarter, marking the sixth consecutive quarterly growth.
While this was lower than the average market forecast for 0.4 percent quarterly — or 1.7 percent annualized — growth, a Cabinet Office official said that the recovery, attributed to a rise in personal spending encouraged by robust corporate results, is strong and expected to continue.
Capital spending grew a real 3.8 percent more than in the previous quarter, with companies investing in such fields as plant engineering, construction and telecommunication equipment like car navigation systems.
Household spending grew a real 0.5 percent more than in the previous quarter, on items such as home electric appliances, overseas travel, education and dining.
The causes for the relatively slow growth were a fall in public investment, down 4.6 percent, as well as modest export growth at 0.9 percent, compared with 2.2 percent in the previous quarter. Housing investment also declined a real 2.7 percent.
In a news conference following the announcement, Economic and Fiscal Policy Minister Kaoru Yosano said the April-June figure indicates the economy is recovering the way the government has wanted, with the figures showing “Japan has attained a milestone to snap out of deflation.”
But he added that there are a number of concerns Japan must pay attention to, namely the surge in oil prices and the economic situation of Japan’s export counterparts, including the U.S. and China. This quarter’s export drop is viewed in large parts as a result of the U.S. economic slowdown.
Some analysts are optimistic about the effect of the fall in exports on the economy.
“It is often said that when overseas economies decline, so does Japan’s because of exports, but I don’t think that’s the case anymore,” said Masaaki Kanno, chief economist at JP Morgan Securities Japan.
“Strength of domestic demand is very clear if we look at such figures as the ‘tankan’ (business sentiment survey) or the July-August companies’ order intake. I think we can say that Japan’s economy is no longer relying on overseas demand.”
He said there are additional positive signs, including a recovery in sales of summer goods, which suffered until June due to cold weather.
Hideo Kumano, chief economist of Dai-ichi Life Research Institute Inc., agreed.
He said the fall in housing investment was a one-time thing caused by the earthquake-resistance data falsification fraud that surfaced last fall. “We can say that domestic demand is strong and stable growth is expected,” he said.
But Yasunari Ueno, chief market economist at Mizuho Securities Co., is not so optimistic.
While the rise in household spending looks strong, “a large part is owed to the change in the calculation method for travel in Japan’s international account statistics” that took place at the beginning of this year, he wrote in a fax report.
This resulted in the amount spent by travelers during Golden Week and the FIFA World Cup tournaments being reported much higher than before, he wrote, adding that the fall in export growth needs also to be taken seriously in this quarter’s figure.