Japanese economic growth revised upwards

| December 9, 2010 | 0 Comments

Official figures have today revealed the Japanese economy grew faster than estimated in the third quarter due to stronger corporate spending.

The world’s third largest economy grew by 1.1% in the July to September period, up from the first estimate of 0.9%.

On an annual basis, the economy expanded by 4.5% from an earlier estimate of 3.9% and exceeded expectations of a revision to 4.1%.

The expiry of a Government incentive prompted a rush of car buyers and a sharp rise in cigarette sales before a new tobacco tax was levied, fuelling growth.

In addition, the hottest summer ever boosted sales of air conditioners and other related items.

However, despite the upward revision, the outlook for the Japanese economy remains one of caution.

Deflationary pressures persist, while the strong yen continues to weaken demand for exports and threatens the economic recovery.

Japanese core consumer prices fell 0.6% in October compared with a year ago – representing the 20th consecutive monthly decline that the economy has been in deflation.

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.

The Japanese Government recently approved a £39 billion stimulus package - designed to boost the fragile economic recovery.

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