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Japan’s growth beats forecasts, but economists remain cautious

TOKYO – JAPAN’S economy grew at double the expected rate in the last quarter of 2007, but some economists saw this as the last hurrah before a slowdown this year.

Strong capital spending and exports helped drive quarterly growth to 0.9 per cent, compared with a forecast 0.4 per cent rise, government data showed yesterday.

The bullish growth – an annual pace of 3.7 per cent compared with a yearly growth rate of just 0.6 per cent in the United States in the October-December quarter – eased investor worries about Japan slipping into a recession, pushing Japanese stocks up 4 per cent.

But economists were less upbeat.

‘The Bank of Japan will likely keep open the option of keeping the current interest rate levels or even rate cuts, as situations have gotten a lot worse since January, and on growing uncertainty about the economy,’ said Mr Yasuhiro Onakado, chief economist at Daiwa SB Investments.

Japanese exports have so far held steady despite the slowdown in the US economy from late last year due to strong demand from elsewhere in Asia and other emerging economies.

The gross domestic product data showed net exports contributed 0.4 percentage point of the 0.9 per cent growth.

Still, as weak US economic data in recent weeks has stoked fears of a recession in America, many economists worry that Japan may not be able to count on exports for much longer.

That, in turn, could curb corporate capital spending, possibly jeopardising the Bank of Japan’s view that strength in corporate activity will spill over to households.

Said Economics Minister Hiroko Ota yesterday: ‘The US economy is slowing down. There is a good chance of Japan’s economic growth slowing temporarily.’

 

Source: REUTERS (The Straits Times 15 Feb 08)

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