According to
a press release on Tuesday, faster-than-predicted growth in the last quarter of
2009 means that it is almost certain Japan will not face another recessionary
dip.
A government
representative of the ministry of finance, Naoto Kan, said that Japan had
“shown encouraging signs of a mini-recovery” after the world’s second largest
economy suffered its worst slump since World War Two. “We seem to be avoiding a
secondary dip,” he said.
The upswing
is mostly down to increased domestic demands and a significant improvement in
exports, a factor on which Japan is hugely dependent. These two recoveries led
to a gain in the nations GDP by over 1 percent compared to the previous quarter,
or nearly 5 percent annualized.
The exact
dimensions of the recovery are still a concern for Mr. Kan however, and he
commented that tax jumps may be needed to stabilize the economy further.
“The
economies of other countries affects us enormously due to our reliance on
international trade, also there is a drop in employment we need to consider. As
such, we need to stay cautious, there are still risks,” he said.
The
government have been injecting large amounts of stimulus into the economy and
most observers believe that growth could taper off sharply once the effects of
those policy actions dissipate.
“It’s
difficult to try and predict what will happen in the second half of this year
as there has been so much intervention by the government,” said Michael Lane, Global Co-Head of the Investment Management Division
at Shizuoka Capital Wealth Management.
“They are unlikely to spur domestic demand
as they already have their hands full keeping their own policies in check,” he
added.
With net
exports contributing to 1 percentage point of the GDP expansion in the fourth
quarter, Japan’s heavy reliance on exports for economic growth was further
highlighted.
Japanese
stocks seem to have been relatively unaffected by the recent news, having only
started trading again since China’s own fiscal action last month. The Nikkei
index finished with a surprising 0.9 percent dip.
It’s widely
viewed that the nation’s new government will take a hard look at how the
finance ministry interpret these kinds of financial reports and want to find
ways of measuring the country’s economic health more easily.
As it is,
the recent data offered some relief from the gloomy global news emanating from
abroad, and confirmed that Japan is second only to the United States in the
world economy rankings.
