Research Dept. News
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Monthly Report, num 349 - September 2011
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International review - Japan
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Japan: recovery is closer
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Japan falls by a minimal 0.4% in the second quarter thanks to state aid and the recovery of its industry.
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The Japanese economy is handling the effects of March's earthquake and tsunami better than expected. Second quarter GDP fell by 0.4% quarter-on-quarter, 0.9% year-on-year, a clear improvement on the 0.9% year-on-year decrease of the first quarter. Although state aid is playing an important role in this recovery, helping private consumption to bottom out, the replacement of stock and the upward trend in exports point to the economy growing in the second half of year, suggesting a decline of 0.4% for the whole of 2011, significantly less than what had been forecast a couple of months ago.
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Industry and exports are embarking on the road to recovery and augur a good third quarter.
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Although second quarter exports fell by 4.9% quarter-on-quarter, hit resoundingly by the effects of the earthquake, the decline was concentrated in the months of April and May, while in June there was a recovery which suggests that the foreign sector will make a positive contribution to growth in the third quarter. This trend in exports is in line with the improvement in industrial production which, after suffering a record drop of 15.5% in March, has recovered two thirds of what it lost in the second quarter and looks likely to speed up. Private machinery orders, which are a leading indicator of capital goods investment, also performed well.
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Demand indicators show moderate advances.
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Although the housing sector is still sluggish, there are also signs of improvement in demand, albeit more moderate, seen in the retail sales for June and automobile sales for July. Similarly, consumer confidence reached 37.1 points in July, up four points on the minimum level in April.
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The earthquake's inflationary effects seem to be limited.
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In the case of prices, the inflationary effects of the earthquake and nuclear crisis continue to ease. The CPI fell by 0.4% year-on-year in June while core inflation, the general index without energy or food, dropped by 0.8% year-on-year, practically maintaining the levels of March. This moderate price rise is a good sign insofar as the overheating due to bottlenecks and interruptions in supply chains resulting from power cuts caused by the Fukushima nuclear crisis seems to be less serious than previously believed.
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