Economic Rebound Extends Into 2010 on Export Demand, Cabinet Office Says
Japan’s broadest indicator of economic health climbed to the highest level since 2008, signaling the economy sustained its expansion through the first three months of 2010.
The coincident index, a composite of 11 indicators including factory production and retail sales, climbed to 101.1 in March, the Cabinet Office said today in Tokyo, the highest since July 2008, according to Bloomberg data. The median estimate of 17 economists surveyed by Bloomberg was for 101.6.
Overseas demand has spurred demand for Japan’s exports, supporting the nation’s recovery from its worst postwar recession and prompting companies from Hitachi Ltd. to Toyota Motor Corp. to forecast better earnings. Economist Azusa Kato forecasts that first-quarter gross domestic product expanded at an annual 6.3 percent pace, which would be the fastest growth rate in a decade.
“We really didn’t expect the economy to grow as much as it did” last quarter, Kato, an economist at BNP Paribas in Tokyo, said before the report. “Exports were just so strong, and the recovery in consumer spending came earlier than we initially expected.”
Hitachi said it may post its first annual profit in five years and Toyota, the world’s largest carmaker, forecast earnings to rise 48 percent this fiscal year as it expands sales in Asian markets including China.
In signs consumers are reaping the benefits of the export rebound, the ratio of job openings to applicants rose for a third month in March, and wages increased for the first time in 22 months. That is boosting optimism among households, whose sentiment is at the highest level in more than two years.
“There’s no doubt that employment will continue to improve,” said Kato. “Consumer spending is headed toward a self-sustained recovery” as people purchase not only items that qualify for government stimulus incentives but also nondurable goods and services, she said.
Japan’s export gains will continue even as Europe struggles to deal with Greece’s fiscal crisis and deficits in neighboring nations, according to Kato.
“The financial markets are in turmoil, but at this point it doesn’t look like Europe as a whole is going to see a big downturn,” she said. “In the long term, an inability for the European Central Bank to tighten policy will boost growth in France and Germany,” which is good for Japan’s exporters, Kato said.
Bank of Japan Deputy Governor Hirohide Yamaguchi said this week Greece’s deepening fiscal woes aren’t hurting Japan’s economy and that policy measures taken around the world will help contain the European sovereign-debt crisis.
The Bank of Japan last month upgraded its forecast for this fiscal year’s growth, saying gross domestic product will rise 1.8 percent, faster than the earlier 1.3 percent estimate.