Japanese Economic Growth Is Forecast

Japan’s economy probably grew for a ninth consecutive quarter in the three months that ended June 30 in the longest expansion since 1997, as consumer spending, business investment and exports all increased.

The world’s second-largest economy grew at an annual 4.2% pace in the period, according to the median forecast of 26 economists in a Bloomberg News survey.

The official growth report will be released by the Cabinet Office on Friday in Tokyo.

The lowest jobless rate in almost four years is helping boost sales at companies such as Honda Motor Co., reducing reliance on overseas demand for growth. And rising sales of digital cameras and other electronics at home and abroad are prompting Matsushita Electric Industrial Co., Canon Inc. and others to increase production.

“Consumer spending is increasingly contributing to growth,” said Takuji Aida, a senior economist at Merrill Lynch Japan Securities in Tokyo. “Domestic demand is showing that it can lead the recovery” even if exports slow.

Japan must sustain the expansion to end six years of falling prices that have sapped corporate profits and prompted banks to reduce lending.

Prime Minister Junichiro Koizumi is relying on increased tax revenue to meet his goal of curbing Japan’s $6.6 trillion in public debt, the world’s largest.

Among the threats to growth are rising oil prices and higher interest rates.

The Japanese economy probably expanded 1%, seasonally adjusted, from the first quarter, according to forecasts.

Annualized growth of 4.2%, although slower than the first quarter’s 6.1% pace, would still make Japan the fastest growing economy in the Group of 7 industrialized nations for the third straight quarter.

The U.S. economy, the world’s largest, grew at an annual 3% pace in the three months ended June 30.