|
Japan GDP beats forecast
|
 |
September 9, 1999: 3:29 a.m. ET
Japanese economy on recovery path; economists cautious on second half
|
LONDON (CNNfn) - The Japanese economy revealed fresh signs of recovery Thursday with a surprise spurt of growth in the second quarter, though economists warned it could tail off in the second half of the year.
Japan's gross domestic product rose 0.2 percent in the three months ending June 30, well above the consensus forecast of a 0.3 percent decline but within the range of estimates. The report sent the yen soaring 2 yen to 108.80 against the dollar, leading the Ministry of Finance to warn it may intervene if the currency falls below 108.
Stock markets across Asia also jumped following the news, with Hong Kong's Hang Seng adding more than 2 percent. Japan's Nikkei jumped almost 100 points before losing much of those gains in late trade.
The second-quarter number comes in the wake of the 1.9 percent jump in the first three months which broke five straight quarters of decline. It takes annualized growth to 0.9 percent.
Japan's Economic Planning Agency, which compiles the data, said the rise was due largely to public works spending and housing investment. The government is pumping 30 trillion yen ($27.2 billion) into the economy in a bid to boost the ailing domestic economy. Public spending climbed 21 percent over the past year.
However, economists remain downbeat about the prospects of Japan maintaining the momentum in the second half of the year. "Without the (stimulus package) this would not have happened. They front-loaded everything into the first half and the money is running out," Seijiro Takeshita, head of Japanese strategy and economics at ABN Amro in London told CNNfn.com. "It is too early to say whether the economy is back on track, particularly in the private sector."
Weak spending on plants and equipment by the corporate sector dragged on growth. "The private sector revival is not as strong as the government would like it to be," added Takeshita. Corporate capital spending fell 4 percent in the second quarter after rising in the first three months.
The data also revealed that prices actually fell 0.7 percent in the quarter, indicating that companies are not raising prices to boost profitability. Economists said the lack of private sector activity may force the government to unveil another supplementary budget of public works spending and incentives.
The yen's rise threatens to increase the tension between the Ministry of Finance, which oversees exchange rate policy, and the Bank of Japan. The ministry remains in favor of intervention to stem the currency's appreciation. The central bank is firmly opposed, after billions of dollars spent over the past two months failed to halt the climb.
However, the risk of deflation if the currency continues to rise may force the ministry back to the market. "If there is an accelerated depreciation to 105 yen, they will intervene without a doubt," said Takeshita. 
|
|
|
|
|
 |
|
