Japan emerges from recession

TOKYO (AP) – Japan’s economy emerged from recession in the last quarter, growing at a 2.2 percent annualized rate as exports and public spending helped to offset weaker residential investment.

However, the preliminary data released yesterday put growth for the world’s third-largest economy in 2014 flat at zero percent, the slowest rate in three years, while real wages fell 0.1 percent.

The economy expanded 0.6 percent in October-December from the previous quarter, a rate that fell below many economists’ expectations.

Private investment that remained anemic, suggesting that businesses and households, which account for the lion’s share of growth, remain cautious about spending.

“The weakness in domestic demand supports our view that output will essentially be flat this year,” Marcel Thieliant of Capital Economics said in a commentary.

The government revised earlier growth figures, suggesting the technical recession of two straight months of contraction was milder than earlier reported.

The economy suffered two straight quarters of contraction following a sales tax hike in April, prompting Prime Minister Shinzo Abe to push back until April 2017 a tax hike planned for October of this year.

The economy contracted at a minus 0.6 percent pace in July-September, Monday’s data showed, compared to the earlier reported minus 1.9 percent pace. The contraction in April-July was revised upward from minus 7.3 percent to minus 1.7 percent.

Many economists had forecast an exit from recession in the October-December quarter thanks partly to stronger demand in the US, Japan’s largest export market.

Abe has sought to foster sustained growth through massive injections of cash into the economy, primarily through central bank asset purchases similar to those used in the US under the Federal Reserve’s quantitative easing policy.

The ultra-loose monetary policy is meant to spur inflation and counter years of deflationary stagnation, but so far Japan remains far short of the government and central bank’s target of two percent.

More than two years into his administration, Abe is struggling to get growth back on a sustainable path and make a “new start.”

In a major policy speech last week, he vowed to push through the biggest reforms in Japan since World War II, reiterating pledges for sweeping reforms of the government bureaucracy, labor regulations and other policies to catalyze growth.

“Now is the time. Through our efforts, Japan can achieve growth once again,” he said.

Sustained growth will depend both on global trends and on whether consumer spending can regain momentum. Abe and other leaders are pushing corporations to raise wages in this year’s spring labor negotiations to help boost consumer demand.