Japan GDP Stronger than Expected

Econintersect:  Fourth quarter GDP contracted much less than first estimated in Japan.  The revised GDP declined at a 0.7% annual rate in the October to December time period.  Less than four weeks ago the preliminary estimate was -2.3%, reported in GEI News.  The Japanese economy has contracted in four of the last five quarters as exports have been curtailed by a strengthening yen and domestic activity was derailed for several months by the March 2011 mega-quake and tsunami that devastated a large swath of northeastern Japan.  Flooding in Thailand, one of Japan’s important suppliers  also impacted production as supply chains were disrupted.

Private investment (up 4.8%) made the strongest contribution to the strengthening of the GDP number, according to The Japan Times. A significant part of this was supported by reconstruction from 2011 natural disaster. In a seemingly perverse calculation, replacing destroyed facilities is counted as new construction and adds to GDP. Parliamentary secretary Hiroshi Ogushi of the Cabinet Office also cited the slowdown in Europe as negatively impacting the GDP number.

The biggest negatives came from a 3.1% decline in exports, a 2.2% decline in public investment and a 1.0% increase in imports, the most significant portion energy related.

The outlook for the Japanese economy going forward is improving, even though the critical current account for the nation that “lives” on exports turned negative. From Reuters:

Larger-than-expected gains in industrial production and bullish output forecasts for the first quarter have raised hopes that Japan’s economy will gather momentum this year.

Japan’s current account balance swung to a record deficit of 437.3 billion yen ($5.41 billion)in January, deeper than the median estimate for a 317.8 billion yen deficit.

Japan logged its first shortfall since January 2009 due to a gaping trade deficit as exports plunged on holiday-thinned Chinese demand while higher fuel costs and nuclear plant shutdowns after last year’s earthquake pushed up energy imports.

John Lounsbury

Sources:

• GDP shrinks but less than first reported (The Japan Times, 09 March 2012)

• Japan GDP Contraction eases; Current Account in the Red (Rie Ishiguro and Kaori Kaneko, Reuters in International Business Times, 07 March 2012)

• Japan’s GDP Declines in Fourth Quarter (GEI News, 13 February 2012)

Articles were found on Econintersect Asia Pacific newspaper page.