While Japanese annual first quarter economic growth is expected to be cut to around 4%-4.2% (around 0.9%-1% quarter on quarter) when the government releases its latest estimate later today, early figures for April suggest the economy remains basically on course.
That’s good news for Australia, with Japan still one of our biggest export destinations, especially for iron ore, coal and energy commodities.
Exports to Asia and consumer spending (thanks to the government stimulus spending) were the drivers of first quarter growth.
The May estimate said the growth in exports accounted for 0.7% of the 1.2% growth in GDP, that is expected to rise a little in today’s estimate.
A cut in business investment will be the main factor lowering the May growth estimate of 1.2% quarter on quarter (4.9% annual). December quarter growth was 4.2%.
Combined capital investment by Japanese non-financial companies fell 11.5% in the first quarter of 2010 from a year earlier, the 12th straight quarterly decline, but the pace of the fall slowed from the 17.3% drop in the final quarter of 2009.
The quarterly survey from the Ministry of Finance also showed that capex excluding spending on software fell 12.9% from a year before in Q1, down from 18.5% in Q4.
The new GDP estimate should give heart to the government of Prime Minister Naoto Kan as it takes power after last week’s departure of Prime Minister Hatoyama.
This week we have seen confirmation of the continued strength of exports in April, while machinery orders, a key indicator of business investment, rose faster than expected.
Machinery orders are seen in Japan as an indicator of business investment in three to six months time and they jumped 4% from March, when they rose 54.% from February.
The market had been expecting a rise of around 1.7% in April.
Japan’s current account surplus jumped 87% from the same month a year (which was depressed as the country struggled out of recession).
The Ministry of Finance data said the surplus was 1,242.1 billion yen, or $US13.58 billion in April.
That was after exports rose by 42.7% and imports rose 26.1% from April 2009.
In facta preliminary report Thursday morning said growth rose to an annual 5.0% in the first quarter, from 4.9%, a big surprise.
