Brisk exports saw Japan’s gross domestic product grow 1.4 percent in the first quarter, marking a turnaround from three straight quarters of contraction, the government said Friday.
But analysts and business leaders are pessimistic about sustained growth.
The gross domestic product growth translates into an annualized expansion of 5.7 percent.
In fiscal 2001, which ended March 31, the economy shrank 1.3 percent in real terms, missing the government’s 1 percent contraction target. It was the first annual drop in three years since fiscal 1998.
Economic and Fiscal Policy Minister Heizo Takenaka told a news conference the January-March data were “within expectations” and confirmed the economy has bottomed out.
“We consider the economy still severe, but it has bottomed out,” he said. “The data confirmed that our view is correct.”
The government declared in its monthly economic report last month that the economy had bottomed out.
Takenaka acknowledged that Japan’s economic growth is currently led by exports, fueled by the economic recovery in the United States and other parts of Asia.
In the January-March term, Japanese exports surged 6.4 percent, up for the first time in six quarters, while imports were flat.
Personal spending, key to achieving sustainable growth, rose 1.6 percent from the previous quarter, up for the second consecutive quarter.
But corporate capital investment, also key for an economic recovery, remained sluggish, falling 3.2 percent for the second straight quarterly decrease.
Real data on GDP, the total value of goods and services produced domestically, are adjusted for inflation and seasonal factors.
External and domestic demand each contributed 0.7 percentage point to the 1.4 percent growth.
Housing investment fell 2.3 percent, following a 0.2 percent decrease in the previous quarter.
Government spending rose 1.2 percent, while public investment increased 4.1 percent.
Mamoru Yamazaki, chief economist for Barclays Capital Japan, echoed Takenaka and said the GDP data confirmed the economy has hit bottom, but said the growth was achieved mainly by external and public demand. A recovery in private demand has been delayed, he added.
He also said corporate capital investment and personal consumption are likely to remain sluggish.
“There is a need (for the government) to adopt an economic policy to boost private demand,” he said.
Tomoko Fujii, a senior economist at Nikko Salomon Smith Barney, said the economy is in a recovery trend but noted the growth figure was better than Japan’s actual economic performance.
“I’m doubtful about the sustainability of the recovery trend, because the government is not likely to change its policy,” Fujii said, adding Japan’s recovery primarily depends on exports. “There is concern that the economy may run out of steam in the coming six months or year.”
In the January-March period, GDP amounted to 530.827 trillion yen in annualized terms, up from 523.5 trillion yen in the October-December quarter.
The GDP deflator, the primary inflation barometer, fell 0.9 percent from a year earlier, staying in negative territory for 16 quarters in a row.
The strong gross domestic product growth figures released Friday morning do not reflect the public’s negative sentiment about the actual state of the economy, business leaders said.
There is a gulf between the figures and the public’s perception, according to Nobuo Yamaguchi, chairman of the Japan Chamber of Commerce and Industry.
Japan’s GDP expanded a real 1.4 percent in the January-March period on a quarterly basis.
“Although the economic expansion is encouraging news, the expansion has emanated from external demand in the United States and elsewhere,” Yamaguchi said.
Yamaguchi called on the government to take all possible measures to boost domestic demand. If the government does not move swiftly, he warned, “the cost and time required to engineer an economic recovery will become greater.”
Given the continued sluggishness of capital investment and housing starts, the government should not hold an optimistic view on the nation’s economic prospects, the Japan Business Federation (Nippon Keidanren) said.
“To achieve the private sector-driven economic recovery, the government should swiftly promote deregulation and tax reforms,” it said.
Yotaro Kobayashi, chairman of the Japan Association of Corporate Executives (Keizai Doyukai), expressed similar sentiments, calling on the government and the business community to take all necessary steps to reinvigorate the economy.
“Corporate managers also need to help create demand (for goods and services) and revive the economy by launching new businesses and developing new technologies,” he said.
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