Japan rises out of post-quake slump

TOKYO » Japan’s economy expanded for the first time in four quarters, recovering from the record March earthquake as companies bolstered production and exports rose.

Gross domestic product grew at an annualized 6.0 percent in the three months ending Sept. 30, the fastest pace in a year and a half, the Cabinet Office said today in Tokyo. The median forecast of 26 economists surveyed by Bloomberg News predicted a 5.9 percent increase.

Japan’s return to growth after three quarters of contraction was driven by companies, including Toyota Motor Corp., making up for lost output from the March disasters. The rebound is already showing signs of waning as the yen’s climb to post-World War II highs and Europe’s deepening fiscal woes threaten the outlook for exports.

The economy’s expansion "is a sign that economic conditions are back to normal," Yoshiki Shinke, a senior economist at Dai-Ichi Life Research in Tokyo, said. "The focus has already shifted to determining the magnitude of the slowdown or whether an expansion is sustainable."

Weaker global demand and Europe’s debt crisis have slowed expansion in Asian nations.

"No country can be immune" to the effects of Europe’s turmoil, International Monetary Fund Managing Director Christine Lagarde said Nov. 12.

Since the March 11 earthquake and tsunami, the country has steadily restored its factories, helping the economy rebound.

The Cabinet Office said the annualized figure translates to GDP growth of 1.5 percent from the last quarter. GDP is a measure of the value of all goods and services produced domestically.

Consumer spending, which accounts for some 60 percent of the economy, climbed 1 percent from the previous quarter. Capital investment by companies rose 1.1 percent.

Analysts, however, say that the strong third-quarter numbers are unlikely to last.

Credit Suisse economist Hiromichi Shirakawa said Japan had benefited from a sharp increase in exports and industrial production into the early summer. But the economy has "already lost upward momentum since August," he said in a report last week.

He expects Japan’s economy to weaken in coming months, and forecasts GDP to contract in the fourth quarter.

Japan’s rebound is likely to slow to 2.1 percent annualized growth this quarter, according to the average forecast of 42 analysts surveyed by the Economic Planning Association, a government- affiliated body, released last week.

Companies plan to cut machinery orders for the first time this year in the quarter ending Dec. 31, a government survey last week showed, a sign growth will slow even as government spending for reconstruction takes effect. Industrial production fell for the first time since the March disasters by a more-than-expected 4 percent in September.

Publicly traded companies have lost $3.9 billion in currency transactions because of the stronger yen, a report by Tokyo Shoko Research Ltd., a credit research company, showed last week. Nintendo Co., the world’s largest maker of video game consoles, forecast its first annual loss in at least 30 years.

Toyota’s second-quarter profit fell a bigger-than-expected 19 percent to 80.4 billion yen in the quarter ended Sept. 30. Even so, Asia’s biggest automaker has been hiring temporary workers to help make up for lost output after the March earthquake and tsunami that left about 19,000 dead or missing caused shortages of parts and electricity.

Japan’s currency advanced last week to its highest level since authorities intervened on Oct. 31, the day the yen reached a postwar record of 75.35 against the dollar. Prime Minister Yoshihiko Noda said in parliament on Friday that the government would sell yen as necessary.

"The Ministry of Finance has been intervening more than they ever have," Martin Schulz, a senior research fellow at Fujitsu Research Institute in Tokyo, said. "This policy helps exporters and it produces liquidity, but it produces major disruptions in Asia in terms of competitive devaluation."

The yen might remain at 77 per dollar until the end of March, according to an estimate compiled by Bloom­berg. Former Japanese Finance Ministry official Eisuke Sakakibara said last month it might strengthen to the low 70s against its U.S. counterpart.

Japanese companies with factories in Thailand have also had to contend with record flooding in the Southeast Asian country. Unable to measure the extent of the damage, Toyota and Honda Motor Co. have scrapped their annual profit forecasts.

The lower house of parliament approved on Nov. 10 a third supplementary budget for the reconstruction of the quake-devastated northeastern region of the nation. The $157 billion budget comes on top of two packages worth a total of $78 billion already pledged.