Japan's economy grew at a brisk 3.5% annualised pace in the fourth quarter of 2007, showing unexpected resilience in the face of growing fears of a US recession, official figures show today.
Investors reacted positively to the robust fourth-quarter growth, which was only slightly weaker than an initial estimate of a 3.7% expansion in the three months to December.
While business investment held up better than expected, the report failed to completely erase concerns about the outlook for the world's second largest economy. The worry is that Japan's export-led recovery could stall if US economic troubles deepen, hitting demand for Asian goods.
Gross domestic product grew by 0.9% compared with the previous quarter, unchanged from the initial estimate, the Cabinet Office said. Financial markets had been braced for an even weaker performance after a finance ministry survey showed a 7.7% year-on-year fall in capital spending in the three months to December.
The government said corporate capital investment in new equipment and factories increased by 2% quarter-on-quarter, down slightly from an initial 2.9% rise. Private and household consumption both grew by a tepid 0.2%.
The Japanese economy is gradually rebounding from recession in the 1990s but consumer spending has remained sluggish, raising worries that the export-led recovery could be hit hard by a global slowdown.
Despite the better than expected GDP data, concerns about the health of the world's second largest economy have grown amid fears of a US recession that could hit Japanese exports and corporate earnings.
Analysts said that the Bank of Japan, which is engulfed in a political row over the appointment of its next governor, may be forced to cut its already super-low interest rates this year to stave off a slump.
