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Japan’s gross domestic product (GDP) in the October-December quarter increased 1.1 percent in real terms or an annualized 4.6 percent from the previous quarter, marking expansion for three consecutive quarters. GDP for all of 2009 fell 5 percent in real terms from 2008 — the worst contraction since the end of World War II.

Relatively good performances that followed a serious slump in the January-March quarter appear to have prevented the Japanese economy from falling into a second dip. Yet the grim employment situation and the downward wage trend do not warrant optimism that economic growth will continue.

In nominal terms, which are thought to better reflect people’s feelings about economic conditions than real terms, GDP in the last quarter increased 0.2 percent from the previous quarter or an annualized 0.9 percent — the first rise in seven quarters. But the GDP deflator, a key gauge of price trends, dipped a record 3 percent from a year before, indicating deflation’s grip on Japan.

Corporate investment rose 1.0 percent — the first increase in seven quarters, indicating better prospects for companies. Consumer spending, which accounts for about 60 percent of GDP, went up 0.7 percent — an increase for the third straight quarter. But consumers may tighten their purse strings if the government withdraws the incentives to purchase eco-friendly products that underpinned a good deal of consumer spending.

Domestic demand pushed up GDP 0.6 percent in the October-December period — the first positive contribution in seven quarters — while external demand raised GDP 0.5 percent as exports rose by 5 percent.

Despite some positives, 2009 saw the average unemployment rate rise 1.1 points from 2008 to 5.1 percent. Job seekers received a record-low response of 0.47 job offers per application. Workers’ wages have fallen for three consecutive years.

In 2009, Japan’s nominal GDP, at $5.08 trillion, narrowly topped China’s GDP of $4.91 trillion. China is expected to surpass Japan on this front this year. What is most important, however, is quality of life. Government and business and labor leaders must do their best to improve the employment situation and to ensure sustainable economic recovery.

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