The economy is expected to expand an annualized real 3.4 percent in the first quarter of 2012 on robust production and a weaker yen to log the strongest growth in the Group of Seven industrialized economies, the Organization for Economic Cooperation and Development said Thursday.
The gross domestic product figure, revealed in an interim report by the Paris-based club of rich nations, represents an upward revision from its November forecast of 1.8 percent growth. As for the second quarter, the OECD said Japan’s inflation-adjusted GDP would grow 1.4 percent from the previous quarter, reducing its previous projection of a 1.8 percent expansion.
“Activity in Japan is projected to rebound strongly in the first quarter, thanks in part to firmer industrial production . . . and a weaker yen,” the report said, adding, “Second quarter growth is projected to be more moderate.”
Industrial output has been recovering since the plunge prompted by the massive flooding in Thailand last fall, which caused supply-chain disruptions and affected Japanese exporters and companies with production bases in the country.
The yen has eased its prolonged advance against the dollar and other major currencies, providing a respite for Japanese exporters, but the development is widely believed to have improved business sentiment overall and boosted corporate capital spending.
The government has predicted an acceleration in GDP growth in early 2012, given rising public spending on reconstruction projects linked to the March 2011 earthquake and tsunami.
Among other G-7 members, the United States is expected to grow 2.9 percent in the three months through March 31, with the OECD upgrading its estimate from 1.7 percent growth. The report confirmed that “growth prospects continue to firm” amid rebounding stock prices and stronger consumer confidence.
With crude oil prices marking a rapid increase recently, the organization warned this could boost inflation in its 34 member countries by 0.25 point while pushing average GDP growth rates down by 0.1 to 0.2 percent.
The sovereign debt crisis in the eurozone continues to weigh on economic activity in the area, the OECD said, expecting the three biggest economies in the unified currency bloc — Germany, France and Italy — to contract 0.4 percent in aggregate.
Canada is expected to grow 2.5 percent, while Britain is projected to contract 0.4 percent.
The OECD releases interim assessments of its major members between each issue of the biannual Economic Outlook projections.