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Japan’s Economy Grows More-Than-Estimated 4.1% on Quake Work

By Keiko Ujikane and Masahiro Hidaka - May 16, 2012 7:41 PM CT

Japan’s economy expanded faster than estimated in the first quarter, boosted by reconstruction spending that’s poised to fade just as a worsening in Europe’s crisis threatens to curtail export demand.

Gross domestic product rose an annualized 4.1 percent, the Cabinet Office said today in Tokyo. The median estimate of 27 economists surveyed by Bloomberg News was 3.5 percent. In the fourth quarter, growth was 0.1 percent, revised data showed.

on Friday, March 9, 2012. Noda has pledged more than 20 trillion yen ($249 billion) to rebuild areas devastated by last year’s earthquake and tsunami.

The yen’s more than 4 percent gain against the dollar since mid-March may encourage politicians to keep pressing the Bank of Japan to add stimulus, with the first-quarter expansion likely to mark the peak for the year. Europe’s debt turmoil threatens to disrupt exports and financial markets as Greece teeters on the edge of exiting from the euro.

“Japan is on a steady recovery path but this high growth probably won’t continue,” said Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co. in Tokyo. “We can’t be optimistic about the outlook.”

Economic growth may be 2.2 percent in the second and third quarters, and 1.7 percent in the final three months of the year, according to the average forecast of 40 economists in a Japan Center for Economic Research survey released May 15.

The Nikkei 225 Stock Average was little changed as of 9:34 a.m. in Tokyo after sliding 1.1 percent yesterday as Greece moved to hold another election after failing to form a new government. Today’s GDP report in Japan revised a fourth-quarter contraction to an expansion.

Asset Purchases

Japan’s central bank failed yesterday to find enough short- term government securities to buy under its asset-purchase program, signaling complications for efforts to spur growth. Officials may need to buy longer-dated debt or other types of assets.

The BOJ increased the program for a second time in three months on April 27 and some lawmakers are urging more aggressive easing as Prime Minister Yoshihiko Noda struggles to secure support for doubling a 5 percent sales tax to help contain the world’s largest public debt burden.

Europe’s woes may fuel renewed demand for the yen as a haven, with the currency trading at 80.34 per dollar as of 9:08 a.m. in Tokyo after climbing to a postwar high of 75.35 in October. Sony Corp. (6758), Japan’s largest consumer electronics exporter, gets a fifth of its sales from Europe.

“The risk will be the yen’s appreciation if the risk-off mode among investors continues,” said Masaaki Kanno, chief economist at JPMorgan Securities Japan Co. in Tokyo and a former BOJ official. “The overseas factors aren’t looking positive for Japan’s economy.”

Reconstruction Spending

Noda has pledged more than 20 trillion yen ($249 billion) to rebuild areas devastated by last year’s earthquake and tsunami. The value of public works contracts, a leading indicator for public investment, rose 10.3 percent in the first quarter from a year earlier, according to data compiled by the Land Ministry, the biggest jump since 2009.
Government subsidies for purchases of fuel-efficient cars gave a boost to consumer spending in the first quarter. They may expire in August, weakening demand later this year, according to Hiroaki Muto, a senior economist at Sumitomo Mitsui Asset Management Co. in Tokyo.

“The increase in consumer spending would be temporary as it was boosted by the government’s measures,” Muto said. “Given that the jobless rate remains high and wages are near flat, it will be difficult for consumers to increase spending considerably.”
At the same time, Japanese companies plan to increase machinery orders at a faster pace this quarter, signaling some continued domestic support for the economy, a report showed yesterday.

Energy Constraints

Constraints on energy use may add to economic challenges. Japan may impose rolling blackouts and electricity-savings targets this summer as utilities struggle to power factories and light homes with all nuclear reactors offline.
In Kansai, which accounts for about 20 percent of the economy and is the nation’s second-most important industrial heartland, consumers face the biggest limit on power use, the government says. The western region is home to Osaka, Kyoto and Kobe cities as well as the headquarters of Panasonic Corp. (6752), Sharp Corp. and Nintendo Co.

To contact the reporters on this story: Keiko Ujikane in Tokyo at; Masahiro Hidaka in Tokyo at



Author: Nobuyoshi Ozaki

A long forty six years have passed since I stepped on to American soil. I have had various odd jobs in the past until I recently retired. Examples include working with Steven Spielberg as assistant director in a film called "1941." I was supervisor and later became Public Relation representative for Toyota Group - USA. My last occupation was a Senior Research analyst working in Silicone Valley for a major news paper from Tokyo, Japan. My spouse, Christine is a flight attendant, traveling often to the Middle East and Africa. We have spent three quarters of our life together as world adventurers. This photo was taken in Argentina. We now live in swampy Louisiana.