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Saturday 20th of February 2010
February 15, 2010    

Japanese economy expands 1.1% in Q4

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by Kay Murchie

The Japanese economy grew at a better than expected 1.1% in the last three months of 2009, meaning it retains its status as the world’s second largest economy.

Meanwhile, official figures show that GDP grew at an annualised pace of 4.6% in the fourth quarter of 2009, cementing a strong recovery from its worst recession in decades.

Japan exited recession in the second quarter of 2009 but there have been fears that the return of deflation could stall growth within the economy.

A short period of deflation (where prices fall rather than increase) could be a serious threat to the economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.

Japan’s fourth quarter figures follow on from those in the euro zone. Last week, official figures revealed the euro zone economy grew just 0.1% in the final three months of 2009, suggesting the economic recovery is faltering.

Meanwhile, Germany, which is the euro zone‘s largest economy, said GDP remained flat in the three month period, with growth unchanged compared with the third quarter.

The area’s third largest economy, Italy, unexpectedly contracted by 0.2% in the final three months of 2009, also causing concern over its recovery.

Furthermore, the Spanish economy is still in recession after the economy contracted by 0.1% in the fourth quarter of 2009 - the seventh consecutive quarter of contraction.

However, the euro zone’s second largest economy, France, posted a 0.6% rise in GDP for the fourth quarter of 2009 - beating analysts expectations.

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