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Economy in Brief

Japan GDP Surges 1.7% in Q4
by Carol Stone February 18, 2004

Japanese GDP jumped 1.7% in Q4, equal to 7.0% at an annual rate. Consensus forecasts had called for 4.3% annualized growth.

Business investment led the surge, up 5.1% (quarterly rate), contributing almost half of the quarter's total GDP gain. Exports were also strong, expanding by 4.2%.

Prices in Japan continue to fall sharply, down 2.6% year-over-year. Export prices declined 6.2% and those for nonresidential investment by 6.0% (price deflators are not seasonally adjusted). The strong yen accounts for at least some of the price deflation. Additionally, expectations are widespread that the strong yen will eventually hurt exports, weakening the economy anew. Thus, investors and commentators greeted today's vigorous GDP results with skepticism. The trend shown in the table below suggests that recent economic strength may be a lagged response to the yen weakness that prevailed until the middle of last year. However, as can be seen in the graph, over longer spans the relationship between the currency and growth appears not to be particularly reliable.

Percent Change in Japan GDP  4th Qtr 2003 3rd Qtr 2003 2nd Qtr 2003 Y/Y 2003 2002 2001
GDP in 1995 Prices 1.7 0.6 0.8 3.6 2.7 -0.4 0.4
  Private Consumption* 0.9 0.5 0.3 2.1 0.9 0.6 1.6
  Private Nonresidential Investment 5.1 -0.2 4.4 12.4 8.8 -7.1 1.1
  Private Residential Investment -1.0 2.9 -0.1 1.0 -0.6 -4.1 -5.4
  Exports: Goods/Services 4.2 3.2 1.6 10.9 9.9 8.0 -6.1
  Imports: Goods/Services 1.4 2.6 -1.2 3.7 4.7 2.0 0.1
GDP in Current Prices 0.7 0.3 0.6 1.2 0.2 -1.4 -1.0
Deflator (Year/Year) -2.6 -2.1 -2.0 -2.6 -2.4 -1.2 -1.5
Real Effective Exchange Rate (BkJapan-Averages) 5.8 0.2 -0.6 5.5 0.5 -5.5 -10.9
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