Analysts warned of a slowdown caused by a strong yen in Japan
AFP reported that Japan's economy grew faster than first thought between January and March 2012 period, but analysts warned of a slowdown caused by a strong yen, Europe's debt woes and weakness in China.
The Cabinet Office said that gross domestic product grew by a revised 1.2% in the first quarter from the previous three months, up from a preliminary figure of 1% expansion. On an annualized basis, the revised figure was 4.7% in the quarter, higher than a preliminary 4.1% rise.
The figures are good news for an economy pounded by last year's quake tsunami disaster, reflecting an upward trend with domestic demand and auto exports on the rise.
However, the recovery has been largely driven by government reconstruction spending and analysts said weak demand in Europe and worries about growth in China could have an impact down the line.
That point was underscored by a finance ministry official who warned that strong yen and the financial crisis in Europe, a major market for Japanese goods, were serious threats to Japan's export oriented economy.
Officials said that "As far as the short term outlook for the export sector is concerned, the state of European economies and foreign exchange are sources of concern."
Exports took a hit as the yen struck record highs against the dollar late in 2011 and the unit remains strong hurting manufacturers whose products become more expensive overseas on a strong currency.
Data showed that Japan's April current account, the broadest measure of trade with the rest of the world, tumbled 21.2% YoY to a surplus of JPY 333.8 billion, well below economists' expectations for a JPY 455.6 billion surplus.
But the measure remained in positive territory by a wide margin, aided by Japanese investment abroad and higher auto exports despite the nation's soaring post tsunami fuel costs.
Mr Junko Nishioka, chief economist at RBS Securities Japan, said that "The latest data confirms that the current account surplus is on a gradually declining trend, even though the fall isn't so precipitous as to make us worry about a fall into the red this year or next."
As Japanese companies shift production overseas due to the relatively strong yen, income has become a key factor in Japan's current account surplus.
Source - AFP