Japan’s gross domestic product in the January-March quarter grew at an annualized 5.7 percent from the previous quarter.

Inventory adjustments by manufacturers in 2001 appear to have run their course.

Exports also rose, aided by recoveries in the U.S. and Asia, and Japan’s economy may thus have gotten over its worst phase. But it would be premature to think the economy is steadily recovering.

Domestic demand appears to lack the energy to drive up the entire economy. Moreover, it is not clear whether the uptrend overseas, upon which Japan must still rely, will continue.

The media is awash with news of corporate restructuring programs and summer bonus cuts, and the job and income situations will continue to worsen, making an immediate consumer spending surge unlikely.

With many firms still burdened with excessive capacity and reduced earnings tightening their cash flow, aggressive corporate investment is hard to imagine.

It may be realistic to say overseas economies will hold steady for now, but the long-term prospects aren’t clear.

Demand for certain semiconductor products has passed its peak, while sales of personal computers and cell phones are sluggish. Nonetheless, Taiwanese and South Korean chip makers are trying to expand capacity, and Japanese semiconductor production equipment makers are flooded with orders.

Unless end-user demand catches up, this export boom will soon peak.

There is also concern over U.S. stocks. Corporate earnings, particularly those in the information technology and communications sectors, are not rising as fast as expected. Institutional investors in the U.S. appear to be reducing their stockholdings, and markets are reacting little to favorable economic news, while unfavorable news often pushes down share prices.

If this bearishness continues, household spending — given its exposure to stock prices — could suffer. A stock slump is also likely to provoke fundraising woes among U.S. firms.

As long as the U.S. economy stays on a steady path, the global economy will be able to maintain a positive trend.

But there are two major concerns — that the U.S. has yet to fully recover from the implosion of the IT bubble, and that it still suffers from a current account deficit due to excessive consumer spending.

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