Is the global economy finally finding a second engine?
Japan almost doubled its economic growth forecast for the current fiscal year on Wednesday, bringing its view in line with private economists who see an upturn in domestic demand adding momentum to an export-led recovery.Up to now the Japanese recovery has been almost solely export-led, thus Japan riding the coattails of US and Chinese consumption rather than its own. With China cooling and US growth uncertain at best, autonomous Japanese growth is just what the global econ doctor ordered.
The Cabinet Office said in its latest forecast that real gross domestic product (GDP) growth, which takes into account price changes, could be 3.5 percent in the year ending March 2005, up from its earlier forecast of 1.8 percent, making it the fastest pace in eight years. . . .
The Cabinet Office said it now forecast consumption in the private sector to rise 2.6 percent in the current year rather than 1.1 percent as previously seen.
It forecast corporate investment to rise 9.9 percent rather than a previous 7.2 percent.
That shows, one top government official said, that the export-led recovery was filtering through to the rest of the economy.
"The broadening of the economic recovery is becoming clearer. Smaller firms were lagging big firms quite a bit, but now (the recovery) is spreading to them," Hideji Sugiyama, vice minister for economy, trade and industry, told Reuters in an interview.
Deflation is still strong in Japan, however, and likely to persist right through not only 2004 but 2005 as well. Ultra-loose monetary policy should persist in Japan for some time, but will they keep buying US treasuries and corporate debt?