Japan fall less than expected
Source: Agencies |
August 16, 2011, Tuesday
|
Print Edition
Print Edition
Japan's economy shrank much less than expected in the second quarter as companies made strides in restoring output after the devastating earthquake in March, but a soaring yen and slowing global growth cloud the prospects for a sustained recovery.
Analysts expect the world's third-largest economy to rebound in July-September, probably expanding at the fastest rate among major industrialized nations as exports and factory output return to pre-disaster levels. But growing risks to this scenario could strain a depleted arsenal of policy tools.
Gross domestic product fell 0.3 percent in the second quarter, less than a median forecast for a 0.7 percent contraction and a 0.9 percent decline in January-March.
The better-than-expected reading helped push up the Nikkei benchmark by about 1 percent, which has also tracked gains in global markets last week supported by a short-selling ban on financial stocks in Europe.
However, worries that Europe's sovereign debt woes could escalate into another global crisis could rob Japan of much-needed export demand, increasing the chance of further yen-selling intervention and monetary easing to secure economic recovery.
Government officials highlighted risks posed by the strong yen and global slowdown to the export-reliant economy, saying they stood ready to act against rapid yen rises while urging the central bank to keep supporting the economy.
"The economy will show a V-shaped rebound in July-September as supply chains are on the mend," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
"But the momentum will weaken from October-December onwards, although it won't fall back into a slump, as the pace of recovery in external demand slows," he said.
Economics Minister Kaoru Yosano urged the Bank of Japan to keep helping the recovery with ample liquidity injections into the market and ultra-loose monetary policy stance.
"We will be closely watching the impact growing global economic uncertainty and yen rises would have on Japan's economy," Yosano said.
Market intervention combined with a further increase of the central bank's asset buying operation and financial support for most affected companies are the few remaining options Tokyo has to cope with the yen's strength.
Analysts expect the world's third-largest economy to rebound in July-September, probably expanding at the fastest rate among major industrialized nations as exports and factory output return to pre-disaster levels. But growing risks to this scenario could strain a depleted arsenal of policy tools.
Gross domestic product fell 0.3 percent in the second quarter, less than a median forecast for a 0.7 percent contraction and a 0.9 percent decline in January-March.
The better-than-expected reading helped push up the Nikkei benchmark by about 1 percent, which has also tracked gains in global markets last week supported by a short-selling ban on financial stocks in Europe.
However, worries that Europe's sovereign debt woes could escalate into another global crisis could rob Japan of much-needed export demand, increasing the chance of further yen-selling intervention and monetary easing to secure economic recovery.
Government officials highlighted risks posed by the strong yen and global slowdown to the export-reliant economy, saying they stood ready to act against rapid yen rises while urging the central bank to keep supporting the economy.
"The economy will show a V-shaped rebound in July-September as supply chains are on the mend," said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.
"But the momentum will weaken from October-December onwards, although it won't fall back into a slump, as the pace of recovery in external demand slows," he said.
Economics Minister Kaoru Yosano urged the Bank of Japan to keep helping the recovery with ample liquidity injections into the market and ultra-loose monetary policy stance.
"We will be closely watching the impact growing global economic uncertainty and yen rises would have on Japan's economy," Yosano said.
Market intervention combined with a further increase of the central bank's asset buying operation and financial support for most affected companies are the few remaining options Tokyo has to cope with the yen's strength.
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