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August 18, 2009

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Home » Business » Economy

Japan gets out of recession

JAPAN'S economy came out of recession in the second quarter, the government said yesterday, growing at an annualized rate of 3.7 percent with a strong rebound in exports.

But Japanese stocks fell over concerns about the strong yen and weak American consumer sentiment that could mean bad news for Japan's export-driven economy. The Nikkei 225 was down 328.72 points, or 3.1 percent, at 10,268.61.

The recovery in the April-June quarter was driven by robust demand for exports such as video recorders and other electronics goods, said Kingo Toyoda of the Cabinet Office. Shipments to China and other emerging markets were particularly strong. Exports grew 6.3 percent from the previous quarter, the highest growth since the second quarter of 2002.

Government stimulus measures - such as cash handouts and incentives to buy ecological products - have helped but economists warn that the impact of such measures may peter out.

Despite the increase in exports, economists said the nascent recovery could quickly run out of steam because domestic demand remains weak. Salaries are falling and the unemployment rate has risen to a six-year high of 5.4 percent as companies such as Toyota Motor Corp and Sony Corp have cut thousands of jobs.

During the quarter through June 30, pay dipped 1.7 percent while consumer spending edged up a tepid 0.8 percent.

"With payments falling, it's really hard to expect individual spending to hold up," said Hiroshi Watanabe, economist with Daiwa Institute of Research in Tokyo.

Global recovery

The rebound in the world's second-largest economy came after a steep, year-long contraction in gross domestic product, including a worst-ever drop in the final quarter of 2008, when the economy shrank at a 13.1 percent pace.

The news from Japan comes amid signs that the global economy may be recovering from its slump. Last week, France and Germany, Europe's two biggest economies, said they resumed growing in the second quarter, while Hong Kong also said it expanded after a year-long recession.

Economy and fiscal policy minister Yoshimasa Hayashi warned that "risk factors" remain, including high unemployment and sluggish production.


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