Impressive growth from Japan’s regional neighbors, most notably China,
seems to be lifting the country out of its recent recession as an
increase in exports and boost in capital spending has translated to
positive reports from financial authorities, with the growth at 4
percent annualized for the last 3 months of the year.
Profits for many Japanese firms rose significantly at the tail end of
2009, even considering the issues at two of the nation’s corporate
titans, Toyota and Japan Airlines Corp., which has grabbed most of the
headlines.
Japan is by no means home and dry, however. The huge stimulus injected
into the economy is set to end soon, and the country may lose the number
two world ranking it holds by a small margin over its biggest trading
partner China by the end of the year. Substantial public debt will make
it very difficult to sustain the recovery, along with ongoing deflation
and growth spurred only by significant cost-cutting.
The outlook remains positive according to the nation’s financial
authorities and economic experts who claim the latest reports “show that
Japan could finally be reaching a level of sustainable recovery.” That
was the opinion of parliamentary secretary Keisuke Tsumura. He added
that the danger of another quick dip into recession has become unlikely.
The surprising lift in the nation’s economy may stave off further
quantitative easing from the Bank of Japan, at least in the short-term.
The central bank’s aim for interest rates now stands at around 0.2
percent. The BOJ also assists with much needed liquidity to the currency
markets hoping to boost demand. The central bank’s board will meet next
week and analysts expect their policies to remain as they are.
With other major world economies such as China, with nearly 11 percent
growth, and the United States, which reported 6 percent expansion,
following in Japan’s footsteps the global outlook looks more positive.
Japan itself announced a 5 percent annualized growth rate for Q4.
The only region lagging behind at this time is the European bloc with just a 0.5 percent gain for the same time period.
“The performance by most of the big 300 Japanese firms is very
encouraging,” said Michael Lane, Global Co-Head of the Investment
Management Division at Shizuoka Capital Wealth Management
who conducted a survey released on Tuesday. “The companies reported a
combined 220 percent gain in profits during the last quarter. The
recovery is on.”
