Saturday, May 17, 2008

Amidst global economic slowdown, Japan observes surprising growth but it will not last long.

Despite economic slow down in the USA and global credit crunch, Japan observed a better than expected economic growth of 3.3% in the first quarter of 2008. Trading with the USA may not have been good but exports to China and other emerging markets have ensured the economic growth of the world’s second largest economy. Rise in housing investment and consumer spending also contributed. AFP reports:

"Japan does appear to be in a sweet spot where demand for capital imports from Asia is offsetting weakness in consumer and auto exports to North America," said Societe Generale economist Glenn Maguire.

Analysts noted, however, that consumer spending had been helped by the fact that 2008 is a leap year, giving shoppers an extra day in February.

"I'm concerned about a future slowdown in the economy. I think that one of the major reasons for the strong growth in the first quarter was the leap year," said Mamoru Yamazaki, chief economist for RBS Securities in Tokyo.

"It will not be a surprise if the second-quarter GDP becomes negative," he warned.

Earlier, Japan was worried about economic contraction due to global slow down but now analysts are saying that Japan will not have to worry about recession at least for the next six months. GDP grew by .8% in the first quarter of 2008. If everything goes well, then Japanese market will enjoy an expansion at the rate of 0.7% per quarter and 2.7% per year.

Ultimately, Japan will experience a slow down in its economy; most probably, at the second half of 2008. According to Tomoko Fuji, Head of Economics at Bank of America in Tokyo, there will be a slowdown in machinery orders along with a slowdown in the export. Since 2008 is a leap year, there will be one extra day which has driven the consumption upwards but at the second half of 2008 it will slow down as well.

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