by winston » Fri May 16, 2008 5:16 pm
Japan's GDP Grows More-Than-Estimated 3.3% on Exports (Update4)
By Jason Clenfield
May 16 (Bloomberg) -- Japan's economy grew 3.3 percent last quarter, faster than economists estimated, as exports to Asia and emerging markets helped the nation weather the U.S. slowdown.
Gross domestic product in the three months ended March 31 was better than the 2.5 percent median estimate of 32 economists surveyed by Bloomberg. Fourth-quarter growth was revised to 2.6 percent from 3.5 percent, the Cabinet Office said today in Tokyo.
Today's figures came a day after Germany reported its economy expanded at the fastest pace in 12 years, resisting the U.S. slowdown. Japan's Nikkei 225 Stock Average has surged 21 percent in the past two months as companies including Matsushita Electric Industrial Co. forecast record profit.
``The big slowdown isn't happening,'' said Jesper Koll, director of Tantallon Research Japan, a hedge fund. ``The world is resilient. Global demand is strong.''
The yen traded at 104.38 per dollar at 4:11 p.m. in Tokyo from 104.87 before the report. The currency has fallen 7 percent against the dollar since climbing to a 12-year high of 95.76 on March 17, easing the burden on exporters' earnings. The yield on Japan's 10-year bond rose 2 basis points to 1.695 percent.
From the fourth quarter, Japan expanded 0.8 percent, the fastest pace in a year. Figures yesterday showed Europe grew a more-than-anticipated 0.7 percent, led by the 1.5 percent expansion in Germany. The U.S. economy grew only 0.1 percent in the same period, and 0.6 percent on an annualized basis.
Middle East, Russia
Matsushita President Fumio Ohtsubo last month said the Beijing Olympics and demand for Panasonic televisions in the Middle East and Russia will help profit climb 10 percent to a record in the year ending March 31.
Other companies are less optimistic. Toyota Motor Corp., the nation's biggest automaker, expects falling U.S. sales, higher commodity prices and the stronger yen to erode earnings. Sony Corp. this week said profit at its electronics division will fall this year because of the currency's gains.
Companies plan to pare orders of machinery, a key indicator of capital spending, by 10.3 percent this quarter, a report showed yesterday.
Finance Minister Fukushiro Nukaga and Economy Minister Hiroko Ota said today that they're concerned about the outlook for business investment, which fell 0.9 percent last quarter.
``The negative effect of the U.S. slowdown is going to hit after a time lag,'' said Seiji Shiraishi, chief economist at HSBC Securities in Tokyo. ``Both households and the corporate sector could be in pretty bad shape, at least through summer.''
Consumers Pessimistic
Household confidence slumped to a five-year low in April, a separate report showed today, as inflation quickened to the fastest pace in a decade. Consumer spending, which accounts for more than half of the economy, grew 0.8 percent last quarter.
Prices of everyday goods rose at more than twice the pace of wages in March. Japanese workers are likely to see summer bonuses increase by the smallest amount since 2002, the Nikkei newspaper reported this week.
``Real income is declining'' and households may tighten their purse strings, said HSBC's Shiraishi. ``Inflation in prices of necessities has a negative impact on psychology.''
The risk of weaker growth prompted the Bank of Japan last month to shelve its policy of gradually raising interest rates. Governor Masaaki Shirakawa and his board are expected to hold the key rate at 0.5 percent, the lowest in the industrialized world, at the end of their next meeting on May 20 and most economists say borrowing costs will stay unchanged this year.
Export Growth
Net exports -- the difference between exports and imports -- accounted for most of Japan's growth, contributing 0.5 percentage point to the quarterly increase. Domestic demand added 0.3 percentage point.
``Even if the U.S. goes into recession, demand from Europe and Asia should hold up reasonably well,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London.
Goldman Sachs Group Inc. and Morgan Stanley last month dropped predictions the world's second-largest economy would slip into a recession, ending the nation's longest postwar expansion.
Residential investment rose 4.6 percent from the previous three months. Housing starts are recovering after plunging since June because of a permit logjam caused by government regulations designed to stop building fraud.
The higher cost of imports probably means that the real GDP growth rate overstates the strength of the economy. In nominal terms, which don't take into account price changes, Japan expanded 0.4 percent on the quarter, half the pace of real growth.
``Imported inflation is squeezing domestic profit margins and wages,'' said Hiroshi Shiraishi, an economist at Lehman Brothers in Tokyo.
Goldman Sachs says annual earnings at Japanese companies will fall for the first time in seven years. That could stifle investment and hiring.
Today's numbers may have also exaggerated growth because some components don't adjust for the leap year. Yuji Shimanaka, chief economist at Mitsubishi UFJ Research and Consulting in Tokyo, said the extra day in February accounted for about half of the increase in consumer spending.
It's all about "how much you made when you were right" & "how little you lost when you were wrong"