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Japanese growth stronger than first thought

Japanese economic output expanded more than initially thought in the second quarter, but the revision was too small to reclaim the title of world's second largest economy from China.

The new data showed that capital spending contributed more to growth than preliminary estimates showed.

The upward revision still shows that the economic recovery has been slowing and remains almost completely reliant on exports, as consumer spending contributed nothing to growth. The contribution from capital spending doubled to 0.2 percentage points from the previous quarter.

Tokyo remains keen to prod consumer spending and Naoto Kan, prime minister, on Friday announced details of a Y920bn ($11bn) stimulus package. Almost half the figure will go toward sales incentives for appliances and housing.

The revised figures published by the government on Friday showed the economy grew a seasonally adjusted 0.4 per cent in the April-June quarter from the quarter before. That compared with a preliminary growth figure of 0.1 per cent.

On an annualised basis, the economy grew at a 1.5 per cent pace.

The cabinet office put Japan’s revised second-quarter nominal gross domestic product at $1,295bn based on the average exchange rate during the quarter. China was $1,337bn.

While the yen’s recent rise to 15-year highs is likely to impact third-quarter comparisons, Chinese total output still appears on track to officially overtake that of its neighbour for the year. Japan’s per capita GDP, however, remains more than 10 times larger than China’s $3,600.

Japan’s preliminary GDP figures are published in advance of key capital spending and inventory data that can cause sharp revisions in the numbers. Japan is also notorious for repeated revisions to previously published data.

Economists are yet to be convinced that the improved capital spending figures mark a turning point in company investment, particularly given business and investor worries about the impact of the yen’s rise on earnings in the second half.

Source: www.ft.com