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Japan surprises with good GDP figure
By Geoff Hiscock
TOKYO, Japan (CNN) -- Japan has posted a surprise lift in economic growth in the December quarter as exports to Asia continue to forge ahead. Cheered by the better than expected figures released by the Japanese government on Friday, investors pushed up the share market and the value of the yen. Tokyo's gains were in contrast with the U.S. and Europe, where markets overnight remained jittery about a possible war in Iraq. Japan said gross domestic product (GDP) in the world's second-largest economy rose 0.5 percent quarter on quarter, for an annualized rate of 2.0 percent. While the figure was better than expected, it was still below the revised 0.7 percent figure for the September quarter and 1.3 percent in the June quarter. The positive news saw the yen strengthen slightly against the U.S. dollar to 120.46. Investors pushed the sharemarket higher Friday. By late morning, the Nikkei 225 average was up about 1.4 percent to 8,718.37, while the broader Topix index was up 0.72 percent to 859.17. Big exporters like Sony, Toshiba and Toyota were all higher. Strong capital investment
CSFB Japan senior economist Chris Walker told CNN that capital investment in the December quarter was much stronger than most people had expected. He said that exports were continuing to hold up strongly, with almost all the growth coming from Asian markets, particularly China. Walker said that consumption was "pretty steady" despite a decline in household incomes. This suggested that Japanese consumers were responding in a new way to the economic situation. Previously, a decline in income would have been met by increased saving rather than spending, Walker said. The rise in GDP, the value of all goods and services in the economy, means Japan's economy has expanded for four straight quarters after emerging from its worst-post war slump. Structural reformThat is good news for the administration of Prime Minister Junichiro Koizumi, who has been battling to get the economy on a stronger growth track through a program of structural reform. But his performance to date has disappointed many observers. Hampering Koizumi's room to move are a variety of negative factors, including the mountain of bad loans weighing on the Japanese banking system, near-record unemployment levels, and more than three years of deflation that has sapped business confidence. Despite the fragile state of the global economy, the continued strength of Asian demand for Japanese goods is keeping the economy in the black. Friday's preliminary GDP figures show that net exports -- particularly to Asia -- made a positive contribution of 0.3 percent to the overall result. Japan's GDP for the whole of 2002 rose 0.3 percent and the outlook for the fiscal year beginning in April is for growth of just 0.1 percent. That is well below the 7 percent-plus figure for China and an expected 5 to 6 percent for South Korea, the other two big East Asian economies. It is also below the forecasts for other advanced economies such as the United States and the U.K. Recession concerns 'overdone'Still, it is seen as a positive outlook, with ING's Tokyo-based chief economist Richard Jerram saying concerns about a renewed recession "appear overdone". Peter Morgan, senior economist at HSBC Securities Japan, told Reuters news agency that while production indicators had been falling, "we don't have a recession with these figures." Merrill Lynch economist Jesper Koll, however, called the figures a "one off wonder." "The urgency to appoint a true deflation fighter at the Bank of Japan is not going to disappear with this report," Koll said. Koizumi will choose a new BOJ governor by next month. The bank is expected to leave monetary policy unchanged at its policy board meeting that ends on Friday, but could take a more radical tack depending on who the new governor is.
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