Exports again push up GDP growth
THE ASAHI SHIMBUN
Japan's economy grew at a faster-than-expected pace during the January-March quarter, but uncertainty over the future also increased because the country remains heavily dependent on exports, analysts said Friday.
According to preliminary estimates released by the Cabinet Office on Friday, gross domestic product during the first quarter of this year rose by a seasonally adjusted 0.8 percent, or an annualized 3.3 percent, from the previous quarter in real terms.
Real GDP grew for the third straight quarter, supported by brisk exports to emerging economies and the European Union, which more than offset the decline in exports to the United States.
Overall exports of goods and services jumped by 4.5 percent, and net exports, or external demand, accounted for 0.5 percentage point of the 0.8-percent growth.
Private consumption, which accounts for more than 50 percent of real GDP, grew by 0.8 percent in the first quarter.
Although its growth rate was larger than the 0.4-percent increase in the October-December quarter of 2007, consumer spending was still too weak to drive overall economic growth.
Many private-sector think tanks are forecasting a decrease in summer bonuses for the second straight year-on-year decline.
In addition, private-sector investment in plants and equipment, which had spearheaded GDP growth along with exports, shrank by 0.9 percent during the January-March period, the first contraction since the April-June quarter of 2007.
Private-sector housing investment, which had plunged amid tightened regulations under the revised Building Standards Law, increased by 4.6 percent, the first growth in five quarters.
Overall, domestic demand contributed 0.3-percentage point to the 0.8-percent growth.
"Although domestic demand modestly contributed to the GDP growth, external demand played a larger role," a senior official of the Cabinet Office said.
It is unclear if the domestic economy can continue to grow after renewing a postwar record of uninterrupted expansion, given the noticeable slowdown in the U.S. economy since early this year, analysts said.
If the U.S. economy slips into recession, exports from emerging economies to the U.S. market will decline, potentially affecting Japan's exports to those countries.
The contraction in corporate investment in plants and equipment was caused by the sharp deterioration in business confidence amid soaring prices of crude oil and raw materials and the appreciation of the yen.
Such investment could shrink further.
Real GDP for all of fiscal 2007 rose by 1.5 percent from a year earlier, exceeding the government's forecast of 1.3 percent, but falling below the 2-percent level for the first time in five years.
GDP on a nominal basis increased by 0.6 percent in fiscal 2007, short of the government projection of 0.8 percent.
The nominal growth rate was lower than the real growth rate for the 10th straight year, underlining the deflationary trend.
During the January-March period, nominal GDP inched up 0.4 percent, or an annualized 1.5 percent, from the previous quarter.
The GDP deflator, which measures broader changes in commodity prices, fell by 1.4 percent from a year earlier, due partly to the stronger yen, which trimmed the yen-denominated value of exports.(IHT/Asahi: May 17,2008)