Japan’s gross domestic product fell less than estimated in the fourth quarter in a pullback that may prove temporary as overseas demand revives production after the nation fell behind China as the world’s second-largest economy.
The annualised 1.1 per cent drop in GDP in the three months through December was driven by a slowing in exports and fading of government stimulus programmes, Cabinet Office figures showed today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News was for a 2 per cent drop.
Japan’s stocks rallied amid confidence the global economic recovery will strengthen as oil prices retreat and international political tensions subside with the resignation of Egyptian President Hosni Mubarak. The rebound is set to benefit Japanese exporters, with Toyota and Komatsu this year raising profit forecasts because of increasing sales abroad.
“This was just a temporary contraction and growth may accelerate more than investors anticipate this quarter and next,” said Kyohei Morita, chief economist at Barclays Capital in Tokyo, who forecast a 1.3 per cent decline. “The export decline was smaller than expected and shipments will keep expanding as long as Asia’s economies continue to boom.”
The Nikkei 225 Stock Average has risen 4.5 per cent this year, and advanced 0.8 per cent as of 10.51 am in Tokyo today. Japan’s benchmark 10-year government bond yields have also climbed since the start of 2010, reaching a 10-month high of 1.35 per cent last week. They slipped today to 1.30 per cent. Japan’s currency traded at 83.35 per dollar. The yen reached a 15-year high of 80.22 on November 1.
Trade impact
Net exports, or shipments less imports, subtracted 0.1 percentage point from GDP, beating economists’ estimates of a 0.2 point drop. Overseas shipments declined 0.7 per cent, also better than forecasts for a 1.6 per cent decline. Imports dropped 0.1 per cent compared with a forecast for a 0.9 per cent decline.
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GDP will expand 0.6 per cent in the first quarter and accelerate to a 1.9 per cent pace by the final three months of 2011, according to the median estimates of 14 economists surveyed by Bloomberg News before today’s report.
Private consumption dragged down GDP after the government ended a subsidy programme to buy fuel-efficient cars in September and reduced incentives to purchase electronic home appliances in December, a programme that will end in March.
“This was a temporary pullback from the stimulus boosts in the third quarter, so we don’t need to be too pessimistic about the economic outlook,” said Susumu Kato, chief economist for Japan in Tokyo at Credit Agricole CIB and CLSA. “The economy will likely gain traction toward the end of this year.”