Japan's Economy Grew 4% Last Quarter

Japan's first-quarter economic growth was faster than the government initially reported after figures showed businesses spent more than estimated.
TradingEconomics.com, Bloomberg 6/10/2008 7:22:55 PM

Gross domestic product expanded an annualized 4 percent in the three months ended March 31, the Cabinet Office said today in Tokyo, quicker than the 3.3 percent estimated last month. The median estimate of 22 economists surveyed by Bloomberg News was for 3.8 percent growth.

Figures since the first quarter suggest growth has slowed as rising oil and raw materials costs erode profits. Japan's soaring import bill caused the current account to narrow more than economists estimated in April and producer prices to climb at the fastest pace in 27 years in May, reports showed today.

Japan expanded 1 percent from the fourth quarter, today's figures showed, more than the 0.8 percent reported last month.

Business spending increased 0.2 percent, compared with a 0.9 percent decline initially estimated, reflecting figures published by the Finance Ministry last week that showed companies increased capital spending by 1.3 percent in the quarter. The ministry's report accounts for about 60 percent of the business investment component of revised GDP.

The same survey showed corporate profits fell 17.5 percent from a year earlier, the steepest decline since the most recent recession in 2001. Reports for April showed household spending fell the most in 19 months, factory production dropped and unemployment climbed.

The Cabinet Office this week said the world's second- largest economy has probably peaked, and companies including Advantest Corp. and Nissan Motor Co. expect conditions to worsen. The risk of a shrinking economy will keep the Bank of Japan from raising its key interest rate from 0.5 percent until next year, according to economists surveyed.

Sales to Asia and commodity-exporting regions such as the Middle East have been keeping the economy afloat as the U.S. slows. Exports, the main driver of Japan's growth in the past three quarters, have expanded each month since November 2003.

Japan's economy has grown an average of about 2 percent in each year of the current expansion, which began in February 2002.