Japan Returned to Growth in Fourth Quarter in Boost for Abe
Japan returned to growth in the fourth quarter, bolstering Prime Minister Shinzo Abe’s campaign to end 15 years of deflation and revive the world’s third-biggest economy.
Gross domestic product rose an annualized 0.2 percent in the three months through December, the Cabinet Office said in Tokyo today, compared with a preliminary calculation of a 0.4 percent contraction. The current account deficit in January was 364.8 billion yen ($3.8 billion), the finance ministry said in a separate release.
Private consumption and public investment fueled the nation’s growth, while a less-than-initially estimated fall in capital spending suggests that a weakening yen may be easing corporate pessimism. Exporters from Toyota Motor Corp. (7203) to Nintendo Co. (7974) raised their profit forecasts as a yen that’s slumped nearly 16 percent against the dollar since mid-November boosts the value of overseas sales.
“Japan’s recession is over and the economy is heading to a recovery,” said Koya Miyamae, an economist at SMBC Nikko Securities Inc. in Tokyo who accurately predicted today’s GDP result. “I expect the pace of growth to pick up in coming quarters backed by government spending, improving corporate profits and the global recovery.”
The yen fell to a near 3 1/2-year low against the dollar, as investors expect an improving labor market in the U.S. will compel the Federal Reserve to slow stimulus even as Japan pledges to extend easing policies. The currency was 0.4 percent weaker at 95.23 per dollar at 11:34 a.m. in Tokyo.
The 0.2 percent growth matched the median estimate in a Bloomberg News survey of 24 economists. The better performance may give a tailwind to Bank of Japan (8301) Governor nominee Haruhiko Kuroda as he pledges more aggressive easing to revive growth.
“It’s a good time to be BOJ governor because Kuroda can say Japan is making progress toward ending deflation when he adds more stimulus,” said Miyamae of SMBC.
Capital spending fell 1.5 percent on quarter, from a preliminary estimate for a 2.6 percent decline, today’s data showed. Private consumption rose 0.5 percent, from an initial reading of a 0.4 percent increase. Public investment was revised up to a 1.8 percent gain, from an initial 1.5 percent rise.
The economy will grow an annualized 2 percent this quarter, according to the median estimate of a Bloomberg survey of economists. Japan’s parliament last month passed a 13.1 trillion yen supplementary budget to stimulate growth.
Net exports subtracted 0.2 percentage point from GDP growth, unchanged from the initial estimate. Japan recorded a record trade deficit in 2012 as exports fell and energy imports costs remained high with almost all nuclear reactors closed after the 2011 earthquake and tsunami disaster.
The current account recorded a third monthly deficit in January after a 4.7 trillion yen surplus last year, the smallest in comparable data that goes back to 1985.
“We expect the current account to continue deteriorating as rapid population aging reduces saving rates and prompts the country to draw down on its net foreign assets, Izumi Devalier, a Japan economist at HSBC Holdings Plc in Hong Kong, said in a research report this week. This ‘‘will have significant ramifications for Japan’s ability to continue funding its ballooning deficits domestically.’’
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