Wednesday, August 13, 2003

The straight dope on Japanese growth, from today's Yomiuri Shimbun:
The embryonic trend toward economic recovery is by no means as robust as it may appear, in fact, the economy remains in a feeble state.

The seasonally adjusted real gross domestic product in the April-June period rose 0.6 percent from the previous quarter, or a 2.3 percent increase on an annualized basis.

While the economy has posted stronger-than-expected growth, we should not take it at face value because the growth figure has been inflated by several special factors. If these factors are excluded, it can be seen that the economy grew only slightly or remained almost static. . . .

One of the special factors buoying the economy is heavy demand for replacement trucks ahead of October's introduction of stricter controls on exhaust gas emissions. The purchase of trucks will be regarded as capital investment by companies. Affected by this demand, corporate capital investment posted a real 1.3 percent increase from the previous quarter.

The second factor is a sharp drop in the number of Japanese going abroad, partly due to the SARS epidemic. . . .

The increase in consumption was chiefly due to brisk sales of liquid crystal display televisions and digital cameras. Another factor was the last-minute demand for cigarettes before a tax increase in July.
The real question of the current "global recovery" is its sustainability. The stars all look rightly aligned to deliver decent growth figures in 2003:III. Can it last? Particularly in the US, the center of the global economy? If so, where are Americans going to get all the money to consume the world's commodity glut?

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