Japan's economic growth best in 13 years
By Daisuke Takato
Bloomberg News
Japan's economy grew at a 7 percent annual pace last quarter, the fastest in more than 13 years, as companies invested more to boost production and a rally in stocks prompted higher consumer spending.
The pace of growth was faster than the 4 percent expansion in the United States reported last month. Gross domestic product grew 1.7 percent from the third quarter, the Cabinet Office said in Tokyo.
Investment by Japanese exporters fueled 2.7 percent growth in all of 2003, extending a recovery from the third recession since 1991. Consumer spending grew 0.8 percent in the fourth quarter, the fastest pace in more than a year, suggesting that export growth is starting to boost the domestic economy.
"Consumer spending was stronger than expected, adding to the exports and business spending that have been driving the economy," said Hisashi Yamada, senior economist at Japan Research Institute.
Still the yen's 15 percent advance in 12 months may hurt overseas sales and slow growth of the world's second-largest economy this year, investors and company executives warned.
"The currency is the biggest problem," Tetsuya Kawakami, a managing director at Matsushita Electric Industrial Co., said at a press conference this month to announce an 8 percent gain in net income last quarter. "An exchange rate of 105 yen to the dollar is probably the limit" to keep profits growing, he said.
A strong currency cuts the yen value of overseas sales and profits and may make Japanese products more expensive abroad. It also threatens to extend five years of falling prices at home by making imported goods cheaper.
"This might be the fastest growth will get," said Hiroki Itoh, who helps manage the equivalent of $1.5 billion of bonds and equities at Cigna International Investment Advisors Co. in Tokyo. He predicted the yen might strengthen to more than 100 to the dollar this year, from 105.82 late yesterday, posing "an extremely big risk" to the economy.
So far, rising export volumes are countering a stronger currency as demand grows in China, the United States and Europe. The economy of China, Japan's second-biggest overseas market after the United States, grew 9.1 percent in 2003, the fastest in six years.
Toyota Motor Corp., the world's biggest automaker by market value, said net income rose 60 percent in the quarter ended Dec. 31, and it expects record earnings for the year to March 31 because of surging sales in the United States.
"We can expect exports to rise in general and capital expenditure to increase," Toyota Managing Officer Takeshi Suzuki said at a press conference this month.
Business spending rose 5.1 percent in the fourth quarter, or an annual pace of 22 percent, contributing half of economic growth. Net exports and consumer spending each accounted for about a quarter of growth.
Matsushita, the world's largest maker of consumer electronics, said it plans to raise annual spending on machinery and factories.
Sharp Corp. plans to double production capacity at a new plant, aiming to regain the top spot as the world's largest maker of liquid-crystal displays for televisions from South Korean venture LG Philips LCD Co.
Consumer spending, which makes up more than half of Japan's $5 trillion economy, may be curbed by rising medical costs and declining wages, say economists including UFJ Institute's Akihiko Suzuki.
