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News You Can Use Japan economy surges in Oct-Dec on strong exports
(Adds finance minister, BOJ official comments) TOKYO, Feb 18 (Reuters) - Japan's economy grew at its fastest clip in over 13 years in the October-December quarter as robust growth in the United States and China boosted exports and spurred business investment. Defying worries about the strength of the yen, gross domestic product (GDP) expanded by 1.7 percent from the previous quarter, the biggest gain since April-June 1990 and beating a forecast from economists of 1.1 percent, government data showed on Wednesday. It was the fourth straight quarter of growth, marking the longest period of expansion in Japan since a nine-quarter run that ended in early 1997. "The basic message is that the speed of economic growth improved dramatically towards the end of calendar 2003, driven by exports and corporate investments," said Richard Jerram, chief economist at ING Securities. "And I think the outlook remains good going into 2004." The economy grew by an annualised 7.0 percent, exceeding a forecast of 4.6 percent and comfortably beating the 4.0 percent growth in the United States in the same period. Nominal GDP, which strips out the effects of price changes, rose 0.7 percent, the third straight quarter of growth. Export demand and new investment by businesses were behind the rise in growth, along with a recovery in private consumption, the largest and most stubbornly sluggish part of the economy. Strong overseas demand for Japanese digital cameras, flat panel TVs, cars and other goods has helped offset the effects of the high yen, which Japanese authorities have declared Public Enemy No.1 because of its possible impact on exports and profits. The government has spent more than 27 trillion yen ($256 billion) since January 2003 to try to rein in the Japanese currency and keep the recovery going. The yen rose 10 percent against the dollar in 2003 but companies have adjusted by restructuring and cutting costs. On Wednesday it was steady around 105.65 (JPY=) to the dollar. "The government may find it difficult to intervene in the currency market, given its case for such action -- that the yen should not strengthen when economic fundamentals are weak -- could be weakened," said Norihiro Fujito, a senior investment strategist at Mitsubishi Securities. But Finance Minister Sadakazu Tanigaki said the strong growth figures won't mean a change to intervention. "As we have said before, intervention is not aimed at leading the yen in a particular direction or at maintaining a particular exchange rate," he told reporters. "Intervention is aimed at preventing overshooting, and there is no change in this policy." YEN WARNING Bank of Japan Deputy Governor Kazumasa Iwata added his own warning, telling a business audience in the western city of Kobe that the yen's strength remained a problem. "A sharp rise in the yen against the dollar is a big risk for the Japanese economy," he said. The stock market also fretted over the yen, with the Nikkei average ( ^N225 - News ) closing down 0.23 percent on concerns the strong GDP growth would further push Japan's currency upwards. Nevertheless, exports rose 4.2 percent in October-December, the biggest gain since April-June 2002, and earnings were strong at big exporters such as auto maker Toyota Motor Corp (Tokyo:7203.T - News ) and electronics firms Canon Inc (Tokyo:7751.T - News ) and Sharp Corp (Tokyo:6753.T - News ). "The economy has improved considerably," Canon President and Chief Executive Fujio Mitarai said this week. "It has been said that Japan was finished, that it had no future. But I believe that is not the case at all." Capital expenditure by businesses grew by 5.1 percent over July-September, beating a Reuters poll forecast of 3.9 percent and helped by new factory and office construction and demand for industrial machinery. "Capital expenditure was really strong. Other figures were mostly in line with consensus forecasts, so this shows investment on machinery was really strong in this quarter," said Hiroshi Yokotani, an economist at Tokio Marine Asset Management. Private consumption rose by 0.8 percent compared with a forecast 0.6 percent, boosted by demand for digital gadgets such as camera phones and a pick-up in services such as tourism. "This is strong confirmation that Japan's economy is on a recovery track," said Tsuyoshi Segawa, a strategist at Shinko Securities. But problems remain. Deflation is still a burden, though price falls have moderated in recent months. The consumer price index fell 0.3 percent in 2003, the fourth straight year of decline. And, unlike bigger companies and exporters, many of Japan's small firms are still not seeing any real pick-up in activity. Yoko Hayashi, 67, who has run a retail clothing shop in a suburb of Tokyo for 26 years, said the backdrop for her business was the worst she had seen. "Overall, in my industry the business climate continues to be very bad, with many companies either shrinking or going bankrupt," she said. "My shop survives only because I have a set clientele that is not severely affected by economic downturn, but the company's performance still remains flat from the previous fiscal year." Back to Original Article: News You Can Use
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