Japan's economy grows for fourth straight quarter

By TOMOKO A. HOSAKA Associated Press Writer

TOKYO (AP) - Japan's economic growth accelerated in the first quarter, as robust export growth spurred companies and consumers to boost spending.

Real gross domestic product grew at an annual pace of 4.9 percent in the January-March period, the government said Thursday.

The figure marks the fourth straight quarter of expansion but misses Kyodo news agency's average market forecast for annualized growth of 5.6 percent.

The results reflect how Japan is benefiting heavily from the recovering global economy, which has led to robust export demand, particularly in China and elsewhere in Asia. Companies have responded by boosting production and capital investments.

Government stimulus measures also lifted consumer demand for big-ticket items like household appliances. But the recovery of private consumption appears to be broadening to items beyond those covered by government incentives. The benefits of export growth may finally be trickling down to households, economists say.

"Rising exports may have started to underpin consumption driven by increasing production, growth in overtime, and other elements related to income," said Masayuki Kichikawa, chief economist at Bank of America Merrill Lynch in Tokyo, before the numbers were released.

In its semiannual outlook report last month, the central bank predicted a brighter future for Japan this year, crediting exports for fueling production, stock market gains and better corporate profits. That should eventually lead to more jobs, higher wages and stronger domestic demand, it said.

Indeed, Japanese companies across the board are reporting big improvements in their annual earnings reports, led by big-name exporters like Sony Corp. as well as banks like Mitsubishi UFJ Financial Group Inc. Earlier this month, Toshiba Corp. said it aimed to quadruple profits and invest $14 billion over the next three years to bolster its strengths in semiconductors and nuclear power.

In the January-March period, exports jumped 6.9 percent from the previous quarter, according to the Cabinet Office's preliminary report. Consumer spending, which accounts for roughly 60 percent of GDP, rose 0.3 percent, while corporate investments increased 1 percent.

Japanese Finance Minister Naoto Kan told reporters he expects the current recovery to continue, though he warned of ongoing risks such as market volatility and deflation, according to Kyodo.

Prices continue to fall, with Japan's consumer prices index down for the 13th straight month in March.

Deflation, which plagued Japan during its "Lost Decade" in the 1990s, can hamper economic growth by depressing company profits, sparking wage cuts and causing consumers to postpone purchases. It also can increase debt burdens.

On a quarterly basis, GDP - or the total value of the nation's goods and services - grew 1.2 percent from the October-December period.