Consumers, exports give Japan an unexpected boost

By Yuri Kageyama
Associated Press

TOKYO — Japan's economy grew by a better-than-expected 0.5 percent in the final quarter of 2002, but analysts and government officials warned against any optimism about the months ahead.

The latest quarterly figures for gross domestic product — the value of a nation's goods and services — translated to an annual growth rate of 2 percent. The four consecutive quarters of growth followed three straight quarters of contraction — Japan's worst recession in at least two decades.

Katsuki Oda of the Cabinet Office, which released the latest figures today, said strong private consumption and a boost in exports drove quarterly growth. Exports were up 4.5 percent from the previous quarter, he told reporters.

Although private analysts had expected dismal data on spending, the figures were relatively healthy as Japanese bought TVs, games and home appliances, Oda said.

But analysts warned that prospects for a continuing rebound were slim.

"Attaining growth for this quarter will be difficult," said Tatsuya Torikoshi, senior economist at Daiwa Institute of Research in Tokyo. "To sum up the situation, things aren't that good but they aren't that bad either."

Government officials expressed similar pessimism.

"The economy has generally stayed flat," Chief Cabinet Secretary Yasuo Fukuda said. "We are certainly not optimistic."

Japan's economy has withered for more than a decade. Manufacturers face increasing competition from Asian nations that can produce cheaper goods. And the government has failed to speed up reforms to encourage new businesses.

After achieving 4 percent and 5 percent growth in the 1980s, Japan's economy slipped into a slowdown. The economy shrank for three straight quarters in 1998 and for two back-to-back quarters in 1993. But the drops were not as serious as those in 2001.

Japan's economy grew 0.3 percent in 2002, mustering its fourth straight year of growth, the Cabinet Office said. It shrank 1.1 percent in 1998.

Unemployment reached a record high of 5.5 percent in December — the third time in a year that the monthly jobless rate reached that level, the highest since the government began keeping comparable records in 1953.

The Tokyo stock market has languished at a 19-year low since last year, fanning fears that even the nation's top banks may sink under the weight of bad loans estimated by the government at 40 trillion yen ($331 billion).

Japan has also had to tackle falling prices for three years. Deflation, a situation in which prices continue to fall, deadens economic activity.