Japan Brief/FPCJ, No. 0985
February 18, 2010


GDP Grows by 4.6% Annual Rate in October-December 2009 Quarter

The Japanese economy grew at an annualized rate of 4.6% in the October-December quarter of 2009, according to preliminary statistics released by the Cabinet Office on February 15. Compared with the preceding quarter, the nation’s gross domestic product (GDP) increased by 1.1%, marking the third consecutive quarter of growth. The level of growth exceeded the forecasts of private-sector economists.

Upon the release of the GDP figures, Minister of Finance Naoto Kan, who concurrently serves as minister for economic and fiscal policy, said, “It seems that concerns about a double-dipped recession have receded to some extent” (The Nikkei, February 15, evening edition). But he was quick to caution against optimism, noting the still severe unemployment situation and downside risks abroad.

The October-December quarterly growth was brought about mainly by strong increases in exports and personal consumption. Exports surged 5.0% over the preceding three months thanks to brisk shipments, among other things, of automobiles and construction machinery like cranes, notably to the United States (also The Nikkei, February 15, evening edition). Electric appliance makers were busy meeting strong demand for flat-panel TVs in China during the quarter.

Personal consumption turned out strong thanks to the government’s stimulus policy of providing subsidies or tax breaks for purchases of eco-friendly cars and electric appliances. In reflection of the upturn in personal consumption and exports, capital investment rose 1.0% over the previous quarter, the first rise in seven quarters. In contrast, public works investment declined by 1.6%, a drop for the second consecutive period, as the effects of their front-loaded implementation tapered off.

Despite some encouraging signs in the last three months of 2009, economists, both official and private, remained generally cautious as compensation for employees (salaries and yearend bonuses) remained depressed and joblessness continued at a level above 5%, while the impact of the government’s stimulus measures is likely to fade out. Exports may also lose steam as stimulus effects in foreign countries similarly weaken.

Another concern is deflation, which was evident from the nominal growth rate (unadjusted to price changes) of the economy during the October-December quarter—0.2% quarter to quarter and a minimal plus 0.9% at an annualized rate. These figures are very small compared with the real annual growth rate of 4.6%, which explicitly indicates declining prices.

It was also reported that the nation’s GDP for the whole of 2009 shrank by 5.0%, the worst in the post-World War II period and the second consecutive annual contraction following the decline of 1.2% in 2008. In nominal terms, the decrease was even sharper at 6.0%, also the worst postwar record. Behind the dismal performance was a crash of demand both at home and abroad under the impact of the global financial crisis that broke out in 2008. Japan’s GDP in 2009 amounted to 474,924 billion yen ($5,084.9 billion), barely ahead of China’s $4,909.0 billion. It is considered certain that this year Japan will be overtaken by China as the world’s second largest economy after the United States. Capital investment plunged 19.3% from the previous year; exports plummeted 24.0%; and personal consumption also fell 1.0%.

Media Commentaries

Editorials of major newspapers more or less echoed the prevailing cautious mood about the trend of the Japanese economy in the months ahead, but the Yomiuri Shimbun and Asahi Shimbun, the two largest dailies, displayed contrasting views about the possibility of a double-dipped recession and the underlying strength of the economy.

As the title of its February 16 editorial, “Double-dip concerns linger for economy,” indicated, the Yomiuri sounded severer in its appraisal of the current state of the economy. It said, “The nation's economic growth has returned to ‘cruising speed’ in a sense, but the latest figure is in fact a spike achieved on the back of economic stimulus measures and the recovery of overseas economies. Concerns persist over the risk of the economy experiencing a double-dip recession after a temporary lull.” It went on, “A self-sustaining economic recovery requires a full-scale recovery in equipment investment” and “We hope the government will devise measures including tax cuts in investment, especially in growth fields such as environment and energy. The government should also study cuts in the effective rate of corporate tax, which is high in comparison with that of other countries.”

In contrast, the Asahi was quite sanguine about the current state of the economy. Its February 16 editorial commented, “The domestic economy is benefiting from the worldwide recovery. Real gross domestic product grew at an annualized rate of 4.6% in the October-December 2009 quarter. The government confirmed that the economy is looking up, even though it is not yet out of the woods.” The Asahi added that despite various risks abroad, “it is safe to say that the danger of the Japanese economy slipping into a double-dip recession is receding.”

Meanwhile, The Nikkei made an issue of the low level of the economy itself despite the October-December quarter advance. Its February 16 editorial noted that “a growth rate close to 5% may not jibe with how it actually feels for businesses and consumers” and “the level of GDP is 6% below the peak achieved in the January-March period of 2008, or 35 trillion yen less in terms of annual amount.” It argued, “Even though the danger of a double-dipped recession has lessened, it’s a far cry from a sustainable recovery centering on private-sector demand.” The Nikkei called for “attention to the risks of fading effects of stimulus measures and the rattling of American and European financial markets.” It also warned, “The government must keep an attentive eye on the economy, including the introduction of a powerful growth strategy, without becoming complacent about the immediate signs of improvement.”

(Copyright 2010 Foreign Press Center, Japan)

*Japan Brief is an original production of the Foreign Press Center, Japan, and does not represent the views of the Government of Japan or of any other body.



<Related Articles>
-JAL Files for Bankruptcy Proceedings to Restructure Itself（2010-01-25）
-Japanese Government Aims for 3% Annual Growth up to FY 2020（2010-01-05）
-Government Puts Together Largest Ever Budget for FY 2010（2009-12-28）
-Government Announces Additional Stimulus Package Worth 7.2 Trillion Yen（2009-12-14）
-Bank of Japan Pumps Additional Money into Banking System（2009-12-04）
-Deflation Returns to Japanese Economy, Government Says（2009-11-25）
-Toyota’s Withdrawal from F1: Japanese Auto Industry Reaches a Turning Point（2009-11-20）
-Japan’s First “Pluthermal” Nuclear Generation Begins（2009-11-13）
-JAL to Be Rehabilitated Under Government Control（2009-11-05）
-G20 Summit in Pittsburgh Commits to Sustainable, Balanced Growth（2009-09-30）
-G20 Finance Ministers Agree to Keep Stimulus Policies in Place（2009-09-09）
-Japan’s GDP Posts Annualized 3.7% Growth in April-June Quarter（2009-08-21）