Consumer Spending Boosts Japan’s GDP by Robust 0.2% : Asia: The unexpected news pushes the yen and stocks higher. Prime minister predicts nation will achieve 0.5% growth for the year.
A long-awaited burst of consumer spending pushed Japanese gross domestic product growth to an unexpectedly robust 0.2% for the quarter ended in June, the government said today.
The news propelled the stock market and the yen higher. At midday today the Nikkei-225 stock index was up 0.7% to 17,768.72. The yen strengthened, with the dollar falling to 109 yen from 111.08 at the New York close on Wednesday.
Prime Minister Keizo Obuchi credited improving consumer confidence for the upswing, and said he expected that the government will now be able to achieve its promised 0.5% GDP growth for the year--a target that which many analysts had deemed unrealistic.
In an exclusive interview with The Times today, Obuchi pledged to employ “all possible measures” to make the fledgling economic recovery sustainable.
“We have accomplished our initial objectives, but we should not be complacent,” Obuchi said, adding, “We can now expect a slight recovery but we must make it a sustainable one.”
The Japanese Economic Planning Agency said that consumer spending rose 0.8% in the April-June period, the second such increase after a year of declines.
Consumer spending powers two-thirds of the Japanese economy, and the U.S. government, as well as international investors, have been worried that Obuchi’s torrential spending on public works would not be enough to keep the economy growing unlessJapanese consumers open their wallets again.
Last quarter’s GDP growth of 2% stunned the world, but many analysts dismissed that figure as a reflection only of government spending to prop up the economy and doubted that the underlying economy had improved much. Analysts had forecast negative growth for the second quarter, with estimates ranging from -0.1% to -0.3%.
While large companies are continuing to restructure and trim inventories, access to financing for medium and small companies has improved, and investment in information technologies is booming, said Shinichiro Kawasaki, analyst for Daichi Life Research Institute.
If Obuchi approves a stimulus package with real spending of at least $4.5 billion, as he is expected to do in the next few days, growth could reach 1.5% for the fiscal year ending in March, Kawasaki said.
“Of course we’re not there yet, so it’s still an economy flying on one engine,” Kawasaki said.
Other observers were more cautious. The president of financial giant Orix Corp., Yoshihiko Miyauchi, in comments made before the GDP figure was released, argued that government spending has so distorted the GDP figures that the stated GDP growth “does not reflect economic reality,” which is that the economy remains flat.
But Obuchi said his New Year’s appeal to the Japanese people to take heart and resume economically vibrant behavior had been answered. “My name is Obuchi, but people call me ‘Opuchimisto,’ ” which sounds like a cross between Obuchi and optimist in Japanese, he said. “I think the Japanese public now expects my policies to bring brighter prospects.”
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Japan Climbs Back
Japan’s long-stagnant economy shows signs of an upturn as consumer spending helped drive a 0.2% increase in gross domestic product for the second quarter.
2nd quarter 1999: 0.2%
Source: Bloomberg News
