Japan’s GNP Up 8.4% in Quarter, a 10-Year High

Japan’s economic growth leaped in the third quarter to the highest level in more than a decade, stimulated by a surge of home investment due to lower interest rates, the government reported Friday.

The government also reported that the broadest measure of Japan’s trade surplus fell 21% in October from its level of a year earlier, shrunken by the effect of the strong yen.

The 8.4% inflation-adjusted annualized growth in the gross national product compared to no growth in the prior quarter and was the highest since the first quarter of 1977.

The leap led to predictions that the Japanese government will attain its goal of 3.5% growth for the year despite the rapid appreciation of the Japanese yen, which has been a major drag on the country’s export-oriented economy.

The figures released Friday by the Economic Planning Agency were likely to be used as evidence that Japan is attempting to alleviate the concerns of foreign trading partners.

“Let’s just say that Japan has entered into a splendid domestic demand quarter,” said Toshiaki Kakimoto, chief economist of Sumitomo Bank.

Most of the growth in the July-September period came from a 48% increase in private home investment, which economists attributed to easy credit caused by five cuts in the Bank of Japan’s discount rate since last year. The rate, which is the lending fee charged to member banks, influences other interest rates.

Another reason for the GNP jump was a large increase in fixed capital expenditures, reflecting the stimulation of a supplemental budget for public works projects enacted by Parliament earlier this year.

In its trade surplus report, the Finance Ministry said Japan’s current account surplus fell from its year-earlier level for the sixth consecutive month, dropping to $6.55 billion in October from $8.25 billion a year earlier and $8.38 billion in September.

The current account measures trade in merchandise and services as well as transfers such as investment income. The numbers are not adjusted to account for seasonal fluctuations.

In the narrower measure of merchandise trade, Japan’s surplus shrank to $7.77 billion from $8.82 billion a year earlier and $8.85 billion in September.

The strong yen shrinks Japan’s trade surplus by making its exports more expensive and imports cheaper. After allowing the yen to rise against the dollar and other currencies, Japanese authorities lately have been trying to arrest its rise, fearing the recessionary impact on its economy.

Exports grew 6.6% from a year earlier, sustained by continued demand for products such as computers and business machines, while imports surged 22.7%, as both categories hit records.

Exports totaled $20.10 billion, up from $18.86 billion a year earlier and $19.88 billion in September. Imports totaled $12.33 billion, up from $10.04 billion a year earlier and $11.03 billion in September.