Japan’s Economy Grew at 9.3% Rate in Quarter

Japan’s economy grew at a nearly 10% rate in the third quarter after consumers and manufacturing companies went on spending sprees and exports boomed, the government announced Tuesday.

It said the economy grew at an annualized pace of 9.3% in the July-September quarter, after contracting an annualized 3.3% in the previous three months.

“The economy is very much on track for rapid growth,” said Soichi Enkyo, chief economist with the Bank of Tokyo.

The strong performance, though, is a mixed blessing for Japan’s trading partners because nearly one-quarter of it came from increased exports.

Japan’s trading partners had hoped the rise in Japan’s domestic demand would translate into increased imports and a reduction of the country’s huge trade surplus. But exports also continue to rise.

Government officials said growth looks virtually certain to top the official 3.8% target for the fiscal year ending next March and could even reach 5%. In 1987-88, the economy expanded 4.9%.

Mood May Continue

“We’re going to power through the first half of next year,” said Kenneth Courtis, senior economist at broker DB Capital Markets (Asia). “All the faucets are open for consumer demand to remain very strong.”

Hefty end-of-year bonuses and income tax cuts under the government’s tax-reform package should keep consumers in a spending mood, economists said.

Japanese manufacturers have already begun to build more plants to help meet surging consumer demand.

Unfortunately for Tokyo’s trading partners, however, the boom in Japanese exports also apparently will continue.

Exports, which jumped 9% in July-September from the previous three months, look if anything to be growing at an even faster rate this quarter, economists said.

“There’s been a renewed export drive,” said William Sterling, senior economist at broker Merrill Lynch Japan.

Japan’s trade surplus is likely to rise to $100 billion in fiscal 1989-90 from an estimated $95.6 billion in the current year, the Sanwa Research Institute said Tuesday.

Pushing Dollar Down

The private research arm of Sanwa Bank also forecast that Japan would come under more pressure to open its markets to foreign goods.

Courtis said the increased exports would also help push the U.S. dollar to a record low against the Japanese yen. A stronger yen would tend to discourage Japanese exports because it would force manufacturers here to raise prices on shipments abroad.

“It will push the yen through 120,” he said. The dollar closed here on Tuesday at 121.54 yen.

Government officials said Japan’s exports might grow further because the strong world economy translated into increased demand for the country’s goods.

“So, we will have to boost our imports more in order to keep reducing our trade surplus,” said one official, who asked not to be identified.