— Repeating Story Published at 2136 ET Wednesday

TOKYO (MNI) – Japan’s economy expanded a solid 1.2% in real terms
in January-March from the previous quarter, unrevised from the initial
reading released last month and posting the fourth straight quarter of
growth, the Cabinet Office said on Thursday.

Revised data confirmed that the current recovery from the global
recession has been underpinned by strong exports to Asia, continued
consumer spending gains and a recovery in business investment.

But for the whole of fiscal 2009, the economy marked the second
largest drop on record in inflation adjusted terms.

As reported last month, Q1 growth was supported almost equally by
domestic demand (+0.6 percentage point) and overseas demand (+0.7

On an annualized basis, GDP rose 5.0% in the first quarter of 2010,
revised up slightly from a preliminary 4.9% growth.

The pace of growth accelerated from +1.1% q/q and an annualized
+4.6% in October-December last year.

The recent growth figures are well above Japan’s potential annual
growth rate estimated around 0.5%.

“The economy seems to be entering a recovery phase. But as for our
assessment of its self-sustainability, we need to make a judgment in our
next monthly economic report,” Keisuke Tsumura, parliamentary secretary
of the Cabinet Office for economic and fiscal policy, told reporters.

The government has not yet announced when it will release its June
monthly report on the economy.

Tsumura also said the government needs to pay attention to the
level of its economic activity in addition to the current recovery

Many economists expected Q1 GDP growth to be revised down to an
annualized rate of about 4%, judging from the outcome of the latest
quarterly survey by the Ministry of Finance released on June 3, the last
piece of information from the demand side to be used for calculating
revisions to GDP.

The combined capital investment excluding spending on software by
Japanese non-financial companies fell 2.6% in the first quarter of 2010
from the previous quarter, marking the first on-quarter drop in two
quarters and weaker than a 0.3% rise in Q4.

From a year earlier, Q1 real GDP rose an unrevised 4.6% after
falling 1.1% in the fourth quarter of 2009.

The latest estimates for private non-residential investment, or
capex, was revised down to a 0.6% quarter-on-quarter rise from the 1.0%
rise initially reported, but its contribution to GDP growth was
unchanged from the preliminary figure of +0.1 percentage point.

Tsumura explained that the downward revision to capex based on the
demand side information that was made available for the revised GDP data
turned out to be smaller than forecast by economists. He added that
capex figures based on the supply side were revised up from the initial

The contribution of domestic demand to the first quarter GDP was
unchanged at +0.6 percentage point reported earlier.

The contribution of net exports was also unchanged at +0.7%
percentage point.

The contribution of private inventories to Q1 GDP was revised down
to +0.1 percentage point from a preliminary +0.2 percentage point.

This was offset by an upward revision to the contribution of
private consumption to +0.3 percentage point from +0.2 point. The q/q
rise in consumption was revised up to +0.4% from an initial +0.3%.

“Bright signs are emerging from many areas of private demand, such
as capital spending and private consumption. Private consumption was
revised up slightly but we have to cautiously analyze capital spending,”
said Tsumura.

Sales of durable goods in the first quarter was revised up to +4.6%
q/q from +4.2%, thanks largely to solid sales of automobiles backed by
tax breaks for buying low-emission vehicles, which in turn led to an
upward revision to overall consumption, he said.

Government consumption was revised down to +0.4% q/q from +0.5% but
its contribution to GDP was unchanged at +0.1 percentage point.

Exports were unchanged at +6.9% q/q in Q1 (vs. +5.8% in Q4) and
imports were also unchanged at +2.3% q/q in Q1 (vs. revised +1.0% in

In nominal terms, the economy rose 1.3%, or an annualized 5.4%, in
the first quarter, both revised up from initial figures of +1.2% and
+4.9%. It was the second straight quarterly growth after +0.3% q/q, or
an annualized +1.3% in the fourth quarter of 2009.

For the whole of fiscal 2009 that ended on March 31, real GDP
contracted by 2.0%, revised down from an earlier estimate of the 1.9%
drop, and compared with an unrevised 3.7% fall in fiscal 2008, which
remains the largest fiscal-year drop.

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