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More encouraging news regarding the global economic recovery, as Japan's economy unexpectedly grew at an annualized rate of 4.6% in Q4, Bloomberg News reported Monday, or well above the 3.5% Bloomberg survey estimate.
Exports, as is typically the case when Japan's economy revs-up, led the expansion, as strong export demand to China was bolstered by rising business capital spending, and improving private consumption, TheAustralian.com reported Monday.
Economic Analysis: The risk of sustained deflation remains in Japan, but the Q4 GDP report was a pleasant surprise.
Japan still has to do more to increase domestic demand, but it now appears that domestic demand will be bolstered by increased import activity. Japan is beginning to see the benefits of China's strong economic performance. Moreover, while Japan's GDP growth rate in the quarters ahead probably will not match the Q4 performance, the bias is tipped away from a possible double-dip recession.
Further, if Japan's performance holds, that would mean that three major economies -- China (already registering robust growth), U.S., and Japan, are now trending toward adequate GDP growth rates, with only the eurozone, 0.1% in Q4, registering an inadequate growth rate.
Bottom Line: Japan still has much work ahead to prevent deflation, but it appears the global economy is getting closer to a self-sustaining recovery -- one that will not need additional fiscal stimulus to sustain the expansion.
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