Japan’s Recovery Is Taking Hold, Economic Index Shows
Written on October 7, 2009
Japan’s broadest indicator of economic health rose for a fifth month in August as global stimulus spending helped the country emerge from its worst postwar recession.
The coincident index, a composite of 11 indicators including factory production and retail sales, climbed to 91.4 in August, the highest since November, from a revised 89.8 a month earlier, the Cabinet Office said today in Tokyo. The median estimate of 11 economists was for a gain to 91.2.
More than $2 trillion in spending by governments worldwide has rekindled global demand, spurring Japanese exports and personal consumption. Reports last week showed manufacturers increased output for a sixth month in August, companies became less pessimistic and households increased outlays.
“Production is constantly growing, though the pace is slowing, and consumer spending is showing signs of improvement,” said Junko Nishioka, chief economist at RBS Securities Japan Ltd. in Tokyo. “The stimulus effects are continuing to keep Japan’s economy on a recovery footing.”
Optimism about a pickup in demand helped the Nikkei 225 Stock Average climb 39 percent since slumping to a 26-year low in March. The Nikkei rose 1.1 percent at 2:08 p.m. in Tokyo. The yen traded at 88.73 per dollar from 88.75 before the report.
Return to Growth
The world’s second-largest economy probably grew at an annual 2.3 percent rate in the three months ended September, according to economists surveyed by Bloomberg. Gross domestic product rose at that pace in the second quarter, the first expansion in more than a year.
Industrial production climbed 1.8 percent in August from a month earlier, capping off the longest stretch of gains in 12 years. The unemployment rate unexpectedly retreated from a record and spending by households rose 2.6 percent from a year earlier, the biggest jump in 19 months.
The Bank of Japan’s quarterly Tankan business survey showed confidence among large manufacturers rose for a second straight quarter from an unprecedented low in March.
Still, the Tankan also showed companies plan to cut spending as profits slump, and economists say the jobless rate is likely to resume rising, inhibiting the recovery. Deputy Prime Minister Naoto Kan said yesterday that the government may need to compile a spending package to support workers.
“We can’t be optimistic about the current state of the economy,” said Kan, who is also in charge of setting economic and fiscal policy.
The three-month moving-average of the coincident index, which the government uses to make its monthly evaluation of the economy, rose to 89.9 in August, the fourth monthly increase, the report showed. The Cabinet Office left its assessment of the index unchanged, saying it’s showing signs of bottoming.
The leading index, a gauge of economic conditions in three to six months, rose to 83.3 from a revised 82.5.
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