Japan latest to leave recession

Japan has become the latest country to emerge from recession, following Germany, France and Hong Kong into growth. It recorded 0.9 per cent growth in the April-June quarter compared to the previous three months, after four consecutive negative quarters.

The improvement in the world’s second-biggest economy was seen as good news by economists and comes as a result of the government pumping funds into the economy as they have done in the West.

The exporter has benefited from recoveries around the world, particularly in neighbour China, and is very sensitive to global consumer demand. With many years’ experience of recession Japan was able to slash inventories rapidly, allowing it to benefit from the recovery equally quickly.

The news comes as France and Germany both reported growth of 0.3 per cent in the quarter, ending year-long recessions in the European powerhouses. And Hong Kong grew by 3.3 per cent in the period, a much better-than-expected performance.

The Nikkei 225 Stock Average fell nearly three per cent in today’s trading however, with the 3.7 per cent year on year growth failing to meet analysts’ expectations of a 3.9 per cent increase. And some are cautious over the level of future growth, with the Bank of Japan warning over unemployment and consumer spending in an echo of concerns in Britain.

WHAT THEY ARE SAYING
Kyohei Morita, chief economist for Japan at Barclays Capital, on Reuters: "Today's data was driven by stimulus steps in Japan and overseas, so Japan's economy is far from self-sustaining growth. The growth level for the July-September quarter will likely be similar to that of April-June, and the pace of growth is expected to slow down thereafter as the effects of government stimulus run their course."

Ian Rowley, Business Week: "For only the second time in six decades, the Japanese electorate looks set to vote out the ruling Liberal Democratic Party. The Democratic Party of Japan, which is expected to takeover, is promising a series of measures aimed at boosting household wealth - and, hopefully, spending - but isn't promising too much for business. Of course, today's economic numbers won't hurt the LDP's chances but, with unemployment still rising, the recovery may be too late for Prime Minister Taro Aso's government." ·