Japan's economy grew at a 7 percent annual pace last quarter, the fastest in more than 13 years, as companies such as Sharp Corp. and Canon Inc. increased investment and falling unemployment spurred consumer spending.
The world's second-largest economy outpaced the 4.7 percent median forecast of 34 economists in a Bloomberg News survey and the 4 percent U.S. expansion. Gross domestic product grew 2.7 percent in 2003, the Cabinet Office said in Tokyo.
Growth in the quarter was the fastest since Japan's bubble economy collapsed in 1990, slashing property values and leading to three recessions. Finance Minister Sadakazu Tanigaki said the government ``needs to continue to fight deflation,'' responding to speculation that Japan sold yen to prevent its gains from curbing exports and pushing down import prices.
The figures ``were quite outstanding,'' said Hitoshi Yamamoto, who manages about $1 billion in Japanese equities as president of Commerz International Management (Japan) Ltd. ``The only concern left is the impact of a strengthening yen.''
The yen traded at 105.69 to the dollar as of 6:25 p.m. in Tokyo, from 105.66 late yesterday in New York, as the Bank of Japan sold the currency, according to traders who deal with the central bank. Tanigaki declined to comment on daily activities.
The Nikkei 225 Stock Average fell 0.2 percent to 10,676.81 at the 3 p.m. close in Tokyo, led by exporters such as Tokyo Electron Ltd., on concern the yen will extend a 14 percent advance against the dollar in the past year, eroding their earnings.
``An exchange rate of 105 yen to the dollar is probably the limit'' to keep profits growing, Tetsuya Kawakami, a managing director at Matsushita Electric Industrial Co., said at a press conference this month.
Bonds Rise
Benchmark 10-year Japanese government bonds rose, pushing the yield down 4 basis points to 1.230 percent, as the report showed deflation deepened in the fourth quarter. A basis point is 0.01 percentage point.
The GDP deflator, a measure of price changes that is used to calculate the difference between nominal and real GDP, fell 2.6 percent from a year earlier, the second-biggest drop in a 23- quarter slide.
``This might be the fastest growth will get,'' said Hiroki Itoh, who helps manage the equivalent of $1.5 billion of bonds and equities at Cigna International Investment Advisors Co. He predicts the yen may rise to 100 against the dollar this year, posing ``an extremely big risk'' to the economy.
Bank of Japan Deputy Governor Kazumasa Iwata said the central bank won't change its policy of zero interest rates because it would take two years of growth of more than 2.5 percent to overcome deflation. The annual growth rate was the fastest in three years and followed contraction of 0.4 percent in 2002.
Business Spending
So far, rising export volumes are countering a stronger currency as demand grows in China, the U.S. and Europe. The economy of China, Japan's second-biggest overseas market after the U.S., grew 9.1 percent in 2003, the fastest in six years.
Quarter-on-quarter, Japan's economy grew 1.7 percent in the fourth quarter in real terms. Nominal GDP, which isn't adjusted for price changes, rose 0.7 percent.
Growing exports are prompting companies to invest more in factories and equipment, fueling profits at machinery makers including Advantest Corp. and TDK Corp., the two biggest contributors to the Nikkei's 24 percent gain last year.
Business spending rose 5.1 percent last quarter, contributing half of growth. Consumer spending rose 0.8 percent, accounting for a quarter of growth, and net exports accounted for another quarter.
Falling Unemployment
Sharp plans to double production capacity at a new plant, aiming to regain the top spot as the world's largest maker of liquid-crystal displays for televisions. Canon, the world's largest maker of copiers, will increase capital spending by 16 percent over the next three years.
The Nikkei's rally and a decline in unemployment to 4.9 percent in December, the lowest since June 2001, helped consumer sentiment soar to a 2 1/2-year high in the fourth quarter. Consumer spending makes up more than half of the economy.
Sales at KDDI Corp., Japan's second-largest cell-phone company, rose in the three months ended Dec. 31 as it added 73 percent more subscribers compared with a year earlier.
Deflation fueled by the yen's gains may curb consumer spending, executives and economists said.
Konica Minolta Holdings Inc., Japan's second-largest photo equipment supplier, said last week that the strong yen cut sales by 9.3 billion yen to 282 billion yen in the quarter ended Dec. 31.
Yen Sales
Digital camera sales are ``very strong and we're going to meet our goal, but our profits are hurting because of extreme price competition,'' said Kiyofumi Tanida, Konica Minolta's general manager.
The Bank of Japan, at the behest of the Ministry of Finance, spent a record 20.1 trillion last year to protect the export-led recovery and prevent deflation from deepening. The BOJ spent another 7.15 trillion yen in January, a record for one month.
From a year earlier, the economy grew 3.6 percent in the fourth quarter, the sixth consecutive quarterly gain. The economy's size in 2003 was 547 trillion yen in real terms, and 499 trillion yen in nominal terms.
The world's second-largest economy outpaced the 4.7 percent median forecast of 34 economists in a Bloomberg News survey and the 4 percent U.S. expansion. Gross domestic product grew 2.7 percent in 2003, the Cabinet Office said in Tokyo.
Growth in the quarter was the fastest since Japan's bubble economy collapsed in 1990, slashing property values and leading to three recessions. Finance Minister Sadakazu Tanigaki said the government ``needs to continue to fight deflation,'' responding to speculation that Japan sold yen to prevent its gains from curbing exports and pushing down import prices.
The figures ``were quite outstanding,'' said Hitoshi Yamamoto, who manages about $1 billion in Japanese equities as president of Commerz International Management (Japan) Ltd. ``The only concern left is the impact of a strengthening yen.''
The yen traded at 105.69 to the dollar as of 6:25 p.m. in Tokyo, from 105.66 late yesterday in New York, as the Bank of Japan sold the currency, according to traders who deal with the central bank. Tanigaki declined to comment on daily activities.
The Nikkei 225 Stock Average fell 0.2 percent to 10,676.81 at the 3 p.m. close in Tokyo, led by exporters such as Tokyo Electron Ltd., on concern the yen will extend a 14 percent advance against the dollar in the past year, eroding their earnings.
``An exchange rate of 105 yen to the dollar is probably the limit'' to keep profits growing, Tetsuya Kawakami, a managing director at Matsushita Electric Industrial Co., said at a press conference this month.
Bonds Rise
Benchmark 10-year Japanese government bonds rose, pushing the yield down 4 basis points to 1.230 percent, as the report showed deflation deepened in the fourth quarter. A basis point is 0.01 percentage point.
The GDP deflator, a measure of price changes that is used to calculate the difference between nominal and real GDP, fell 2.6 percent from a year earlier, the second-biggest drop in a 23- quarter slide.
``This might be the fastest growth will get,'' said Hiroki Itoh, who helps manage the equivalent of $1.5 billion of bonds and equities at Cigna International Investment Advisors Co. He predicts the yen may rise to 100 against the dollar this year, posing ``an extremely big risk'' to the economy.
Bank of Japan Deputy Governor Kazumasa Iwata said the central bank won't change its policy of zero interest rates because it would take two years of growth of more than 2.5 percent to overcome deflation. The annual growth rate was the fastest in three years and followed contraction of 0.4 percent in 2002.
Business Spending
So far, rising export volumes are countering a stronger currency as demand grows in China, the U.S. and Europe. The economy of China, Japan's second-biggest overseas market after the U.S., grew 9.1 percent in 2003, the fastest in six years.
Quarter-on-quarter, Japan's economy grew 1.7 percent in the fourth quarter in real terms. Nominal GDP, which isn't adjusted for price changes, rose 0.7 percent.
Growing exports are prompting companies to invest more in factories and equipment, fueling profits at machinery makers including Advantest Corp. and TDK Corp., the two biggest contributors to the Nikkei's 24 percent gain last year.
Business spending rose 5.1 percent last quarter, contributing half of growth. Consumer spending rose 0.8 percent, accounting for a quarter of growth, and net exports accounted for another quarter.
Falling Unemployment
Sharp plans to double production capacity at a new plant, aiming to regain the top spot as the world's largest maker of liquid-crystal displays for televisions. Canon, the world's largest maker of copiers, will increase capital spending by 16 percent over the next three years.
The Nikkei's rally and a decline in unemployment to 4.9 percent in December, the lowest since June 2001, helped consumer sentiment soar to a 2 1/2-year high in the fourth quarter. Consumer spending makes up more than half of the economy.
Sales at KDDI Corp., Japan's second-largest cell-phone company, rose in the three months ended Dec. 31 as it added 73 percent more subscribers compared with a year earlier.
Deflation fueled by the yen's gains may curb consumer spending, executives and economists said.
Konica Minolta Holdings Inc., Japan's second-largest photo equipment supplier, said last week that the strong yen cut sales by 9.3 billion yen to 282 billion yen in the quarter ended Dec. 31.
Yen Sales
Digital camera sales are ``very strong and we're going to meet our goal, but our profits are hurting because of extreme price competition,'' said Kiyofumi Tanida, Konica Minolta's general manager.
The Bank of Japan, at the behest of the Ministry of Finance, spent a record 20.1 trillion last year to protect the export-led recovery and prevent deflation from deepening. The BOJ spent another 7.15 trillion yen in January, a record for one month.
From a year earlier, the economy grew 3.6 percent in the fourth quarter, the sixth consecutive quarterly gain. The economy's size in 2003 was 547 trillion yen in real terms, and 499 trillion yen in nominal terms.
3287.99
1275.09
