Japanese economic growth is expected to have slowed sharply in the second quarter of 2007, hit by slowing exports to the United States, analysts predict. Still, the world's second-largest economy probably managed to grow for a 10th straight quarter as consumer spending and capital investment - the main domestic growth engines - remained relatively firm, they added.
The government is expected to report Monday that Japan's gross domestic product grew by 0.3 percent in the second quarter for an annualised rate of 1.0 percent, according to the average forecasts of 10 economists.
That would be sharply slower than the annualised rate of 5.4 percent in the final quarter of 2006 and 3.3 percent in the first quarter of 2007. "While exports to Europe and Asia were relatively strong, they failed to compensate for a rapid decline in shipments to the US," NLI Research Institute senior economist Taro Saito said.
Exports to the US, Japan's key trading partner, fell 4.8 percent in April from a year earlier, the first fall in 27 months. They then recovered to rise 0.4 percent in May and 6.7 percent in June. "As a result, net exports appear to have made a negative contribution to the quarterly growth for the first time in four quarters," Saito said.
Economists believe that residential investment and public sector investment dwindled in the second quarter, as Japan is fighting to reduce public debt by slashing public works spending projects. But they said healthy corporate capital investment continues to underpin economic growth.
"Non-residential investment, equal to corporate capital investment, appears to have maintained the expansion, led by brisk investment by retailers and the financial service sector, which offset a moderation in momentum in the manufacturing sector," Japan Research Institute economist Makoto Ishikawa said.
Economists also envisage a sustained rise in private consumption, albeit at a slower rate. "Although consumer confidence is deteriorating due to higher gasoline prices and worries about a hike in local tax, an improvement of the labour market, as evidenced by falls in the unemployment rate, supported private consumption," Goldman Sachs Securities economist Naoki Murakami said.
The government said recently that the nation's jobless rate dropped to 3.7 percent in June from 3.8 percent in May, the lowest level since February 1998. Analysts said unless much weaker than expected, slower GDP growth should not stand in the way of the Bank of Japan raising interest rates this month.
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