Japan set to post modest economic growth: Analysts
Japan is expected to report on Thursday that its economy posted modest growth in the fourth quarter of 2007 on the back of brisk demand for its exports in China and other Asian nations.
By Agencies |
TOKYO: Japan is expected to report on Thursday that its economy posted modest growth in the fourth quarter of 2007 on the back of brisk demand for its exports in China and other Asian nations, analysts predicted.
The world's second-largest economy probably grew for a second straight quarter in the three months to December, but growth was limited by a slump in housing construction activity, they added.
"GDP likely grew at a decent pace in the fourth quarter, driven by exports. But we expect sub-par growth in 2008, with an increased risk of recession," Lehman Brothers economist Kenichi Kawasaki wrote in a note to clients.
Market forecasts are for gross domestic product (GDP) to show a rise of about 0.4 per cent in the fourth quarter, and for an annualised growth rate of 1.5 per cent.
That would mark steady growth compared with the third quarter of 2007. The economy contracted 0.5 per cent in the second quarter.
"External demand as well as private consumption and capital expenditure are expected to have underpinned the headline growth," predicted UBS economists.
"However, residential investment should have offset some of the positive impact from those firm demand components," they added.
The expansion will be welcomed by the Bank of Japan (BoJ), but the central bank will still find it hard to justify higher interest rates given growing worries about the health of the domestic and global economies, analysts said.
Expectations of another rate hike have receded in recent months due to uncertainties over the outlook for the global economy.
There is even speculation that the BoJ may be forced to cut rates later this year if the US economy slips into recession, which would hit Japanese exports. A credit crisis triggered by a wave of mortgage defaults has pummeled the US.
The BoJ is due to begin a two-day monetary policy meeting on Thursday, soon after the release of the GDP data. But the central bank is widely expected to leave rates on hold at 0.5 per cent, where they have been since February 2007.
Robust capital spending by companies on new plants and equipment is expected to have helped the economy remain on the recovery path in the fourth quarter, analysts said.
Consumer spending is also seen as remaining a key driver of growth thanks to the popularity of consumer electronic goods such as flat screen televisions, next generation DVD recorders and video game consoles, analysts said.
But a lull in residential investment was probably a drag on growth after the government introduced tighter building regulations in June in the wake of a scandal over earthquake-vulnerable buildings.
Further ahead, there are concerns that the manufacturing sector could be hit by a slowdown in exports as the US economy falters, analysts said.
"There is a risk of the Japanese economy pulling back slightly in January-March, if it loses the prop of external demand," warned Morgan Stanley economist Takehiro Sato.
Japan's benchmark Nikkei-225 stock market index has already fallen around 10 percent in 2008, in part due to concerns about the country's economic prospects.
The world's second-largest economy probably grew for a second straight quarter in the three months to December, but growth was limited by a slump in housing construction activity, they added.
"GDP likely grew at a decent pace in the fourth quarter, driven by exports. But we expect sub-par growth in 2008, with an increased risk of recession," Lehman Brothers economist Kenichi Kawasaki wrote in a note to clients.
Market forecasts are for gross domestic product (GDP) to show a rise of about 0.4 per cent in the fourth quarter, and for an annualised growth rate of 1.5 per cent.
That would mark steady growth compared with the third quarter of 2007. The economy contracted 0.5 per cent in the second quarter.
"External demand as well as private consumption and capital expenditure are expected to have underpinned the headline growth," predicted UBS economists.
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"However, residential investment should have offset some of the positive impact from those firm demand components," they added.
The expansion will be welcomed by the Bank of Japan (BoJ), but the central bank will still find it hard to justify higher interest rates given growing worries about the health of the domestic and global economies, analysts said.
Expectations of another rate hike have receded in recent months due to uncertainties over the outlook for the global economy.
There is even speculation that the BoJ may be forced to cut rates later this year if the US economy slips into recession, which would hit Japanese exports. A credit crisis triggered by a wave of mortgage defaults has pummeled the US.
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The BoJ is due to begin a two-day monetary policy meeting on Thursday, soon after the release of the GDP data. But the central bank is widely expected to leave rates on hold at 0.5 per cent, where they have been since February 2007.
Robust capital spending by companies on new plants and equipment is expected to have helped the economy remain on the recovery path in the fourth quarter, analysts said.
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Consumer spending is also seen as remaining a key driver of growth thanks to the popularity of consumer electronic goods such as flat screen televisions, next generation DVD recorders and video game consoles, analysts said.
But a lull in residential investment was probably a drag on growth after the government introduced tighter building regulations in June in the wake of a scandal over earthquake-vulnerable buildings.
Further ahead, there are concerns that the manufacturing sector could be hit by a slowdown in exports as the US economy falters, analysts said.
"There is a risk of the Japanese economy pulling back slightly in January-March, if it loses the prop of external demand," warned Morgan Stanley economist Takehiro Sato.
Japan's benchmark Nikkei-225 stock market index has already fallen around 10 percent in 2008, in part due to concerns about the country's economic prospects.
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