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Thursday, 17th May 2012
In Business In Japan,

Japanese economy grows during first quarter

The Japanese economy is showing signs of a recovery, with official figures released by the government today showing that gross domestic product (GDP) increased by one per cent in the first quarter of 2012.

This figure is just above the 0.9 per cent originally forecast, while the figure brings the annual rate of growth to 4.1 per cent - significantly higher than the 3.5 per cent that analysts had predicted, Reuters reported.

Though this level of quarterly growth is still relatively small, it represents a significant improvement on the 0.2 per cent shrinkage experienced during the final quarter of last year and is much higher than many countries in the eurozone.

2011 was a particularly difficult year for Japan's economy, with the twin disasters in March compounded by a very strong yen damaging the country's competiveness.

However, while consumers appear to be spending more again, the figures suggest that growth in the world's third biggest economy will slow during the rest of the year.

Currently the rebuilding process following the earthquake and tsunami is contributing significantly to spending, but as this winds down growth is expected to be stifled.

The figures also suggest that the Bank of Japan will maintain existing economic policies ahead of a meeting planned for next week.

"Consumer spending and public investment are what drove the economy, with auto demand stirred by government subsidies and investment helped by extra budgets after the earthquake," Itochu Economic Research Institute chief economist Yoshimasa Maruyama told the news agency.

"So, with government policies behind the quarterly growth, we can't say this is a reflection of real strength in the Japanese economy."

In spite of this, this level of economic expansion will be envied in some European countries, with the likes of Greece, Spain, Portugal and Italy all seeing their economies shrink in recent months.

Written by Susan Ballion