Advertisement

Japan limps out of recession

The Japanese economy grew by 0.6% in the fourth quarter of 2014 – an unexpectedly slow recovery.

The Japanese economy grew by 0.6% in the fourth quarter of 2014, an unexpectedly slow recovery from the recession induced by a consumption-tax hike in April. The annualised growth rate was 2.2%. While exports looked solid, gaining 2.7%, private consumption expanded by only 0.3%.

Household spending is 3.4% down on a year ago. Industrial production is also weak. The Nikkei 225 index nonetheless climbed to an eight-year high above 18,000.

What the commentators said

The government and the central bank are "openly pushing companies to be more generous". The labour market is tight, with the ratio of job openings to applicants at a 23-year high. Barclays is pencilling average pay rises of 2.4%, compared to 2.2% last year.

Advertisement - Article continues below

Even if wages rise, the Bank of Japan seems likely to step up its quantitative-easing measures. The big drop in oil is pushing down prices, with core inflation (inflation minus food) threatening to fall below zero by the summer, as the FT's Lex pointed out. The Bank of Japan's inflation target is 2%.

It wants to combat the "deflationary mindset", whereby the private sector tends to hold back on investment or spending, by raising inflation expectations. More money printing portends further falls in the yen and increases in the stockmarket.

So the economy will now either "start walking on its own two feet", said Back, "or it will get another helping hand". Either way, "holders of Japanese stocks should benefit".

Advertisement
Advertisement

Recommended

How long can the good times roll?
Economy

How long can the good times roll?

Despite all the doom and gloom that has dominated our headlines for most of 2019, Britain and most of the rest of the developing world is currently en…
19 Dec 2019
Can Hong Kong survive as a financial hub?
Emerging markets

Can Hong Kong survive as a financial hub?

As Beijing tightens the screws on Hong Kong, many fear the death of the territory's autonomy – and of its status as a global financial hub.
28 May 2020
More mammoth stimulus in Japan
Japan stockmarkets

More mammoth stimulus in Japan

Japan's prime minister, Shinzo Abe, has unveiled a mammoth stimulus plan worth 20% of GDP. 
9 Apr 2020
South Korea’s economic emergency
Asian economy

South Korea’s economic emergency

South Korea, already ailing because of the US-China trade war, is facing an "economic emergency"
27 Feb 2020

Most Popular

An economics lesson from my barber
Inflation

An economics lesson from my barber

On reopening his shop after lockdown, Dominic Frisby’s barber doubled his prices. It’s all part of the post-Covid inflation process – and we’re going …
8 Jul 2020
Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?
UK Economy

Can Rishi Sunak save the economy with stamp duty cuts and half-price meal deals?

John Stepek runs his eye over the chancellor's £30bn stimulus package and asks if it's enough to get the economy back on its feet after months of lock…
9 Jul 2020
A first-half home run for investment trusts
Sponsored

A first-half home run for investment trusts

The investment trust sector has seen some extraordinary performance in the first half of this year. Max King looks at what's behind it, and asks: is i…
7 Jul 2020