End of recession for Japan?

Japan's recession is over

Japan's recession is over

Is this the end of recession? At least, latest data indicated that. According to the revised survey, Japan saw its economy expand in the final quarter of 2012. Certainly, the news is a good sign for Prime Minister Shinzo Abe who is focused on getting Japan out of two long decades of deflationary stagnation.

Japan enjoys growth

According to data released on the 8th of March, Japan’s gross domestic product increased 0.2 percent in the final quarter of 2012, compared to previous official estimates of a 0.4 slump. The revision of economic growth is undeniably encouraging for the Shinzo Abe’s government as it indicated higher corporate spending and private consumption as well.  Naturally, the revision also increased full year growth to 2 percent from the previous jump of  1.9 percent.

But indeed, Japan’s growth was mainly driven by private consumption and public investment. In addition, a weakening yen has been slowly easing corporate pessimism. This was also indicated by a smaller-than-expected decreases in capital spending.  Japan’s exporters, including Toyota Motor Corp., which were much hurt by the territorial dispute over the Senkaku Islands , have raised their outlooks due to a weak yen. And while Japanese producers such as Nintendo Co. and Sony Corp. enjoy stronger interest in their goods, they also have to face raised costs for imports of fuel.

Analysts believe that the latest results are clear signal of the end of recession or at least that the Japan’s economy is heading to a recovery.

In addition, the Finance Ministry informed that the current account deficit in January amounted to almost 365 billion yen ($3.8 billion).  It was the third straight month when Japan witnessed a deficit.

Shinzo Abe in shining armor

When Shinzo Abe took office in December 2012, he informed that he would introduce more aggressive measures to end two decade-long deflationary stagnation in Japan. The latest BOJ moves are said to have been influenced by Prime Minister Shinzo Abe’ s approach which was a clear threat to the independence of the central bank.

Indeed, Prime Minister Shinzo Abe had a strong beginning. He has started replacing people, who have other views on Japan’s economic problems and the best cure for these plights, with people who share his opinions. Thus Shinzo Abe got rid of Masaaki Shirakawa and replaced him with Haruhiko Kuroda as as new governor for the Bank of Japan.

Analysts are convinced that last steps taken by  Prime Minister Shinzo Abe should bring a faster rate of growth in the near future. The pace will be accelerated by government spending, improving global economic conditions and corporate profits as well.

Without a question, data showed that Japan got out of the long and tough recession sooner than expected; therefore Prime Minister Shinzo Abe will strengthen his stance as a leader. He will undoubtedly have more bargaining chips to introduce its ideas aimed at boosting growth.  Some analysts note that we will have to wait a little bit longer to see the Japan’s economy standing on its feet.

Jay Raol

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