TOKYO: Japan’s economy eked out slight growth in the first three months of the year, revised figures showed yesterday, beating some forecasts for a contraction but doing little to allay concerns that another recession is looming.
A few hours after the figures were released, the Bank of Japan (BoJ) said it would leave monetary policy unchanged, disappointing those hoping for stronger action.
The government revised the gross domestic product (GDP) figure for the January–March quarter to growth of 0.1% from the preliminary zero growth it announced last month.
As widely expected, largely technical revisions to the figures brought down growth in capital spending, as companies remained concerned about their prospects at home and abroad. Imports fell and private demand was revised up to 0.4% from 0.3% growth, helping to prop up the overall figures.
“Domestic demand is obviously worse because of weak capex, but that was offset by weaker imports,” said Peter Morgan, the chief economist of HSBC Securities. “It’s only because of price declines that we’re getting even roughly stable GDP. We’re looking roughly flat in the current quarter.”
In nominal terms – before taking Japan’s stubborn deflation into account – GDP fell 0.4% from the previous quarter.
With the global economy struggling in the second quarter in the wake of the Iraq war and the Severe Acute Respiratory Syndrome outbreak in Asia, the chances of Japan resuming a strong recovery may be receding.
Yesterday’s figures confirmed that all three of the world’s major economic engines are sputtering, with the United States posting only 0.5% growth in the first quarter and Germany – Europe’s largest economy – contracting 0.2%.
Most analysts in a recent Reuters poll said they expected Japan to slump into its fifth recession in 11 years this year.
The BoJ, under pressure to help prevent a recession, yesterday turned its attention to one of Japan’s hardest hit sectors, the tens of thousands of small companies that are the backbone of the economy.
Starved of credit by banks burdened with piles of bad loans, many smaller companies – often the main sources of employment in less affluent rural areas – are struggling to stay afloat. – Reuters