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Does Japan offer hope around the world? | Does Japan offer hope around the world? |
(1 day later) | |
By Kabir Chibber Business reporter, BBC News | By Kabir Chibber Business reporter, BBC News |
Japan has become the latest major economy to take a tentative step out of recession. | Japan has become the latest major economy to take a tentative step out of recession. |
The world's second-largest economy grew 0.9% in the second quarter from the first three months of the year, figures showed on Monday. | The world's second-largest economy grew 0.9% in the second quarter from the first three months of the year, figures showed on Monday. |
Japan joins France and Germany in terms of leading nations that are showing positive growth after a torrid year. | Japan joins France and Germany in terms of leading nations that are showing positive growth after a torrid year. |
It seems quite a turnaround for Japan, whose gross domestic product (GDP) was declining at its quickest pace ever - 13.1% on an annualised basis - in the final three months of last year. | It seems quite a turnaround for Japan, whose gross domestic product (GDP) was declining at its quickest pace ever - 13.1% on an annualised basis - in the final three months of last year. |
What does this mean for the global economy? | What does this mean for the global economy? |
Asian benefits | Asian benefits |
In the first instance, it's very positive for all the countries in Asia. | In the first instance, it's very positive for all the countries in Asia. |
It does not feel like things are improving at all... My children complain about how tough things have been at work Mayumi Kuronuma, Tokyo housewife Japan still gloomy despite growth | It does not feel like things are improving at all... My children complain about how tough things have been at work Mayumi Kuronuma, Tokyo housewife Japan still gloomy despite growth |
Their largest economy is showing signs of recovery, which means increased Japanese demand for their products and greater trade between the nations. | Their largest economy is showing signs of recovery, which means increased Japanese demand for their products and greater trade between the nations. |
Japan was helped by its biggest trading partner, China, which also showed signs of a rebound in its second quarter, as its $586bn (£355bn) stimulus package started to kick in and boost consumer demand. | Japan was helped by its biggest trading partner, China, which also showed signs of a rebound in its second quarter, as its $586bn (£355bn) stimulus package started to kick in and boost consumer demand. |
China's economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter. | China's economy grew at an annual rate of 7.9% between April and June, up from 6.1% in the first quarter. |
For Japan, the implications of such a boost are obvious. | For Japan, the implications of such a boost are obvious. |
Japan's exports rebounded 6.3% during the quarter, the first gain in more than a year. | Japan's exports rebounded 6.3% during the quarter, the first gain in more than a year. |
This is also important for Europe. Japan is the European Union's sixth-largest export market and the fourth-biggest buyer of European imports, according to 2007 figures from the European Commission. | This is also important for Europe. Japan is the European Union's sixth-largest export market and the fourth-biggest buyer of European imports, according to 2007 figures from the European Commission. |
Any boost to Japan is a boost to its major partners. | Any boost to Japan is a boost to its major partners. |
But that does not mean the nascent economic recoveries in Europe and Japan are the same. | But that does not mean the nascent economic recoveries in Europe and Japan are the same. |
'Distorted' | 'Distorted' |
"You have to differentiate between what's been happening in Europe and the situation in Japan," says Peter Dixon, an economist at Commerzbank. | "You have to differentiate between what's been happening in Europe and the situation in Japan," says Peter Dixon, an economist at Commerzbank. |
"In Europe, there's been a rebound in real activity," he adds, meaning that domestic demand has actually picked up in France and Germany. | "In Europe, there's been a rebound in real activity," he adds, meaning that domestic demand has actually picked up in France and Germany. |
"Japan is distorted by the fact that prices actually fell quite sharply in the quarter," Mr Dixon says. | "Japan is distorted by the fact that prices actually fell quite sharply in the quarter," Mr Dixon says. |
Data shows that consumer prices in Japan dropped 1.76% over the last quarter. So that while the volume of goods and services rose, the actual value of those products fell. | Data shows that consumer prices in Japan dropped 1.76% over the last quarter. So that while the volume of goods and services rose, the actual value of those products fell. |
A recovery fuelled by cost-cutting does not necessarily point to a fundamentally healthier economy. | A recovery fuelled by cost-cutting does not necessarily point to a fundamentally healthier economy. |
While Japan has struggled with falling prices for well over a decade, this disparity between the boost to output has partly been explained by Japan's large stimulus package. | While Japan has struggled with falling prices for well over a decade, this disparity between the boost to output has partly been explained by Japan's large stimulus package. |
The Japanese government unveiled a 15.4 trillion yen ($162bn; £100bn) package in April, on top of two other stimulus boosts in the previous year, taking the total public stimulus to the economy to about $260bn. | The Japanese government unveiled a 15.4 trillion yen ($162bn; £100bn) package in April, on top of two other stimulus boosts in the previous year, taking the total public stimulus to the economy to about $260bn. |
Many say that this massive flow of money is doing its job and boosting the Japanese economy. | Many say that this massive flow of money is doing its job and boosting the Japanese economy. |
Stimulus measures | Stimulus measures |
Does this mean that President Barack Obama's huge $787bn (£488bn) economic stimulus plan passed early this year will help the US economy show a rebound like Japan's? | Does this mean that President Barack Obama's huge $787bn (£488bn) economic stimulus plan passed early this year will help the US economy show a rebound like Japan's? |
"You're likely going to see a big boost in US GDP in the third quarter," Mr Dixon says, partly because of the popularity of the car scrappage scheme in the US, which provides cash towards a new vehicle in exchange for an older gas-guzzler. | |
He says that the problems in the UK and US were mostly concentrated in the banking sector, "which means that conventional stimulus measures won't have such a huge impact". | He says that the problems in the UK and US were mostly concentrated in the banking sector, "which means that conventional stimulus measures won't have such a huge impact". |
Germany's stimulus was mainly towards its car industry | Germany's stimulus was mainly towards its car industry |
The UK's stimulus was of a different kind. It has spent far more as a proportion of its economy bailing out its banks than most other countries. | The UK's stimulus was of a different kind. It has spent far more as a proportion of its economy bailing out its banks than most other countries. |
And the British and US governments' measures to bail out their biggest banks and boost lending are mostly new and untested. | And the British and US governments' measures to bail out their biggest banks and boost lending are mostly new and untested. |
The Japanese measures - to boost sales of fuel-efficient vehicles and consumer electronics - have largely delivered as much as should be expected, considering Japan did not have to deal with the near-collapse of its banking system. | The Japanese measures - to boost sales of fuel-efficient vehicles and consumer electronics - have largely delivered as much as should be expected, considering Japan did not have to deal with the near-collapse of its banking system. |
UK rebound? | UK rebound? |
With positive signs emerging from Europe and the US, the UK's biggest trading partners, this may bode well for the British economy too. | With positive signs emerging from Europe and the US, the UK's biggest trading partners, this may bode well for the British economy too. |
The next estimate of the UK's GDP in the second quarter, currently a contraction of 0.8% from the previous quarter, will be released on 28 August. | The next estimate of the UK's GDP in the second quarter, currently a contraction of 0.8% from the previous quarter, will be released on 28 August. |
"It does suggest that the initial estimate of the UK GDP in the second quarter, which many thought was too negative, will indeed be revised up," Mr Dixon says. | "It does suggest that the initial estimate of the UK GDP in the second quarter, which many thought was too negative, will indeed be revised up," Mr Dixon says. |
And the boost in world trade may lead to a positive UK growth figure in the third quarter, he predicts. | And the boost in world trade may lead to a positive UK growth figure in the third quarter, he predicts. |
"The recovery in global demand will put a floor under the UK. What's good for the rest of the world can only be good for the UK." | "The recovery in global demand will put a floor under the UK. What's good for the rest of the world can only be good for the UK." |
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