Japan exits recession

Japan's economy rebounded from an earthquake-triggered recession in the third quarter by expanding 1.5 percent, a pace that is likely to slow down though as a strong yen and weak global growth darken the outlook. The growth - the fastest among major industrial nations - was fuelled by robust exports and consumption after companies restored supply chains wrecked by the March earthquake and tsunami, bringing output and overseas sales to pre-disaster levels.
On an annualised basis, the economy expanded 6.0 percent. The growth figures were in line with market expectations and came after three straight quarters of contraction. But just as the world's third-biggest economy has emerged from recession it faces new headwinds from the eurozone debt crisis, a fresh shock to supply chains from the Thai floods and the strong yen, which has blazed a trail of successive record highs against the dollar.
"The situation surrounding Japan's economy is increasingly severe due to weakening global economic recovery, effects of Thai floods and rapid yen rises," Economics Minister Motohisa Furukawa told reporters.
"We'll continue to watch risks to the economy." With the economic bounce tailing off, the onus is now on public spending in the nation's biggest rebuilding effort since World War Two to sustain the recovery. A 12.1 trillion yen ($157 billion) supplementary budget is now in parliament and the government hopes it will be passed by the end of this month.
Much longer term, Prime Minister Yoshihiko Noda's government hopes a US-led effort to forge an Asia Pacific free-trade pact will help lift the country's economic growth, which has largely stagnated since a property bubble burst in the late 1980s. Economists polled by Reuters earlier this month saw Japan's economic growth slowing down to 0.5 percent this quarter.
Some said the economy might even shrink again as floods in Thailand - a major production base for Japanese manufacturers - disrupt production and as emerging economies cool. Net exports contributed 0.4 percentage point to GDP growth in the third quarter, the first positive contribution in five quarters, thanks to companies' rebuilding efforts following the earthquake and tsunami.
Private consumption, which makes up about 60 percent of economic activity, grew a stronger-than-expected 1.0 percent, lifted by a pick up in automobile sales as supply bottlenecks eased. Corporate capital spending was up 1.1 percent in line with forecast. While reconstruction after the disaster is expected to support economic growth, the corporate mood is less optimistic.