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Wednesday, September 10, 2003

Japan Growth Spurt?

This will please Joerg, who back in the summer predicted 4% Japan growth this year. If things continue like this I will have to eat my hat. The thing is I don't expect them to continue like this. And remember, there is still 2.5% deflation registering on the GDP deflator, which means in nominal (current prices) terms GDP only grew 1.4% (provisionally). I think we should wait a little before we start jumping to conclusions:

Japan has been growing faster than the US for the first time since 1991, according to revised second-quarter gross domestic product figures released on Wednesday. The data showed that the economy grew by a real 1 per cent between April and June and 3.9 per cent on an annualised basis, largely thanks to higher-than-estimated capital spending. That compared with an annualised second-quarter growth in the US of 3.1 per cent. The data are better than Japan's earlier announcement in August that the economy grew 0.6 per cent, or 2.3 per cent on annualised basis, in the second quarter. The world's second largest economy also returned to nominal growth in the second quarter after two straight years of decline, with nominal growth rate of 0.5 per cent. Japan's lacklustre real growth had until recently been wiped out by deflation. As a result, the economy is smaller now than it was in 1997. The GDP deflator, the most reliable measurement of deflation, has been negative since 1995 and is now standing at about minus 2.5 per cent. “From now on we need to pay attention to nominal growth,” said Richard Jerram, economist at ING, who said this could have a strong effect on corporate profits. “This might be the most significant aspect of the GDP release.”
Source: Financial Times

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