Japan's economy grows for 4th straight quarter

Japan's economy grew an annualised 1 per cent last October to December. It has now expanded for a fourth consecutive quarter for the first time in more than three years.
Japan's economy grew an annualised 1 per cent last October to December. It has now expanded for a fourth consecutive quarter for the first time in more than three years.PHOTO: EUROPEAN PRESSPHOTO AGENCY

But risks of US protectionism, weak private spending cast doubt on recovery

TOKYO • Japan's economy grew for a fourth straight quarter in the final three months of last year, as a weaker yen supported exports.

But tepid private consumption and the risks of rising United States protectionism cast doubts over a sustainable recovery.

Data yesterday showed that the world's third-largest economy grew an annualised 1 per cent last October to December, roughly in line with the 1.1 per cent increase markets had expected, following a revised 1.4 per cent expansion last July to September.

Japan's export-driven growth over the quarter has helped fill the economic shortfall left by anaemic domestic demand. But accompanying this tailwind are concerns that Japan's persistent trade surplus with the US may make it a target of President Donald Trump's criticism.

Economy Minister Nobuteru Ishihara said Japan remained in a moderate recovery trend and expected the positive momentum to be maintained, but he sounded a cautious note on the outlook.

"Attention should be paid to uncertainty over the global economy and fluctuations in financial markets," he told reporters after the gross domestic product (GDP) data release.

Analysts were equally cautious. Said Mizuho Research Institute senior economist Hidenobu Tokuda: "The corporate sector strength has not spread to households who are facing higher costs of living and future uncertainty."

Private consumption, which accounts for about 60 per cent of GDP, showed no growth, largely in line with a flat reading forecast by economists. Rising prices of fresh food and vegetables are likely to have dented households' purchasing power.

"Unless we get private consumption fired up, it's hard to see growth accelerating very strongly from here," said Merrill Lynch Japan Securities chief economist Izumi Devalier.

Japan's economy has now expanded for a fourth consecutive quarter for the first time in more than three years.

Data for last year shows that overseas demand now accounts for about half of the expansion in GDP, leaving the economy particularly exposed to any new trade barriers from the US, which is Japan's biggest export market after China.

"A risk for Japan's economy is that too much dependence on exports could trigger criticism from the US, which is paying so much attention to trade between the two nations," said Credit Suisse Group economist Takashi Shiono.

"(Prime Minister Shinzo) Abe may have to show that the government is also trying to shore up the economy by implementing even more fiscal policy."

REUTERS, BLOOMBERG

A version of this article appeared in the print edition of The Straits Times on February 14, 2017, with the headline 'Japan's economy grows for 4th straight quarter'. Print Edition | Subscribe