TOKYO, Feb 15 (AFP): Japan is expected to report Friday a sharp acceleration in its economic growth in the fourth quarter of 2005 as a pick-up in domestic demand gave extra thrust to the recovery. Japan's gross domestic product (GDP) is projected to have grown by 1.2 per cent in the December quarter, or at a blistering annualised rate of 5.0 per cent, according to a poll of 10 economists. That would mark a fourth straight quarter of positive growth and a significant pick up from a quarterly rate of 0.2 per cent and annualised pace of 1.0 per cent recorded in the three months to September. It would also be more than four times the annualised 1.1 per cent rate registered in the United States in the same period. "While exports and corporate capital investment maintained solid growth, gains in consumer spending accelerated amid the exceptionally cold weather condition, thereby pushing up the growth momentum in the past quarter," Daiwa Institute of Research senior economist Junichi Makino said. "The forthcoming GDP data will thus confirm that the Japanese economy is recovering steadily after having emerged from a prolonged soft patch," he said. Daiwa expects the economy to have expanded by 1.2 per cent in the fourth quarter, or at an annualised rate of 4.8 per cent, as consumer spending jumped 1.0 per cent, beating the 0.4 per cent gain in the July- September quarter. The government announced last month that retail sales rose 1.1 per cent last year, the first annual increase in nine years. Strong GDP figures would probably reinforce expectations that a recent pick-up in consumer prices will continue, setting the scene for an end to the Bank of Japan's super-loose monetary policy. "Due to improvements in the labor market and wage conditions, consumers are loosening their grip on their purses, which has been evident with brisk sales of luxury items," said Takahisa Masuda, general manager for finance at Japan's largest department store operator Takashimaya. Adding to the brightening picture, the government said last week the jobless rate fell to 4.4 per cent in December from 4.6 per cent in November. Economists also believe that corporate capital investment, which accounts for nearly 15 per cent of the world's second- largest economy, gained further momentum in the fourth quarter with global IT demand picking up. "Thanks to a turnaround in export demand, Japanese companies, which have so far focussed on repairing old plants, are now becoming more willing to spend to boost production capacities," Mitsubishi Research Institute economist Kazuhiro Ohshima said. Mitsubishi Research expects GDP to have expanded by 1.7 per cent last quarter, or at an annualised rate of 7.1 per cent, as capital investment rose 2.1 per cent from the previous quarter, up for the seventh straight quarter. External demand also regained strength, boding well for the overall economy. The Ministry of Finance announced earlier that gross exports from Japan increased for the 25th straight month in December. "Exports extended growth on the back of a pick-up in demand in China, as well as a rebound in exports of autos to the US," Japan Research Institute economist Makoto Ishikawa noted. Economists also predict that Friday's data will show another year-on- year fall in the GDP deflator after a 1.4 per cent fall in July-September, pointing to lingering deflationary pressures despite recent rises in consumer prices. The core consumer price index, which excludes perishable food prices, rose for the second straight month in December-the clearest sign yet that Japan is finally wrestling free of almost eight years of damaging price falls.
|