Cabinet Office: January-March GDP up 4.9% annualized

May 23, 2010
By Ken Worsley

On Thursday, the Cabinet Office announced that Japan’s GDP had risen an annualized 4.9% in the January-March quarter. This result was lower than the 5.5% gain forecasted by a Bloomberg survey and the 5.9% forecasted by a Dow Jones survey. Real GDP has now risen in each of the past four quarters.

Nominal GDP grew 1.2% on the quarterly basis, the largest increase seen in a decade, on the back of export gains. According to data released by the Ministry of Finance, exports to Asia rose 12.3% in January-March from the previous quarter in seasonally adjusted terms and those to the European Union rose 5.6%, while shipments to the U.S. declined 1.4%.

Commentators in many news sources have been citing continued increased household and personal consumption as keys to sustaining the economic recovery. While consumer spending did rise 0.3% in the January March quarter compared to the previous quarter, it remains unclear as to how much of the gain may be attributed to government stimulus packages.

Of course, the recent rise in the yen is making exporters nervous. While the government still maintains that it does not plan to intervene in foreign exchange markets, Finance Minister Naoto Kan told reporters he would like to see the Bank of Japan encourage banks to lend out more money, as he questioned “whether all factors in the latest GDP growth are self-sustaining.”

Kan knows that they are not; increased corporate profits are still not leading to higher wages in an economy with a declining population, which means that increases in domestic consumption are hardly in a position to be called self-sustaining. This would lead GDP growth to be driven by exports and capital spending. Capital spending is not nearly as significant a part of GDP as domestic consumption or exports, and exports, which are threatened with forex risk, are also increasingly dependent on the continued growth of emerging markets, especially in Asia.

Filed Under Cabinet Office, Economic Reports, GDP