Japan's economic growth accelerated in the third quarter of this year to record the second straight expansion recovering from the worst financial crisis since the great depression. The Japanese economy was backed by a rebounding industrial production in addition to recovering exports which picked up along with rising world demand.
Japan's gross domestic product preliminary reading showed the economy expanded 1.2% in the third quarter from the previous three months compared with a previous expansion by 0.6% that was revised to 0.7%, while analyst's estimates referred to 0.7%. The annualized GDP expanded 4.8% in the third quarter from a previous revised 2.7% from 2.3%, and it grew more than the anticipated 2.9%.
Since the economic crisis began last year, the Japanese government allocated as much as 25 billion yen to be spent on roads, schools and other infrastructure projects in addition to cash incentives to households in order to encourage sales of fuel efficient cars and home appliances. Stimulus spending helped to ease deteriorations in the business sector and to boost sales after households had to cut purchases amid high unemployment and low income levels.
Capital spending that accounts for 15% of the economy rose 1.6% in the quarter ended September the first gain in six quarters that was followed by increasing machine orders which jumped 10.5% in September giving signs of optimism among manufacturers as they started to spend more on equipments and factory tools after cheerful earnings we witnessed in the last quarter. Manufacturers are responding to the increase in world demand and planning to use more capacity that should help ease deteriorations in the labor market through hiring more workers.
As for consumer spending that accounts for about half of the economy, it increased 0.7% last quarter higher than analyst's forecasts of 0.6%. The exports sector also continued showing signs of improvements after the sharp decline we witnessed in the first three months of this year. Exports rose 6.4% in the third quarter as demand from Japan's main trade partners is increasing especially from China that took the U.S place to be Japan's first overseas customer.
The Japanese labor market is showing some improvements even if jobless rate remains relatively high. Industrial production rebounded seven straight months, while exports continued to increase and companies are hiring more workers which helped to see Japan's jobless rate declining to 5.3% in September from 5.5% in August.
Moreover, the Bank of Japan decided in its latest meeting to end its corporate debt buying program by the end of this year as it became easier for companies to acquire fund needed for its business alongside cheerful economic data we witnessed during the last quarter, worth mentioning that the BOJ started its rescue program after lowering its benchmark interest rates to 0.10% in December to support the economy.
Deflation risks remain threatening the economy, having consumer prices declining 2.2% in September from a year earlier as weak domestic demand forced companies to reduce prices to attract consumers. Raw materials and energy prices remain lower than last year's levels but its currently recovering alongside world recovery, so the main threat comes from weak domestic demand that needs better conditions in the labor market to start recovering. Yet, the BOJ expected deflation to persist through fiscal 2011.
Finally, the world's second largest economy is likely to show more signs of recovery as the exports sector that is a main pillar for economic growth is advancing along with rebounding industrial production and increasing investments and capital spending.
Japan's gross domestic product preliminary reading showed the economy expanded 1.2% in the third quarter from the previous three months compared with a previous expansion by 0.6% that was revised to 0.7%, while analyst's estimates referred to 0.7%. The annualized GDP expanded 4.8% in the third quarter from a previous revised 2.7% from 2.3%, and it grew more than the anticipated 2.9%.
Since the economic crisis began last year, the Japanese government allocated as much as 25 billion yen to be spent on roads, schools and other infrastructure projects in addition to cash incentives to households in order to encourage sales of fuel efficient cars and home appliances. Stimulus spending helped to ease deteriorations in the business sector and to boost sales after households had to cut purchases amid high unemployment and low income levels.
Capital spending that accounts for 15% of the economy rose 1.6% in the quarter ended September the first gain in six quarters that was followed by increasing machine orders which jumped 10.5% in September giving signs of optimism among manufacturers as they started to spend more on equipments and factory tools after cheerful earnings we witnessed in the last quarter. Manufacturers are responding to the increase in world demand and planning to use more capacity that should help ease deteriorations in the labor market through hiring more workers.
As for consumer spending that accounts for about half of the economy, it increased 0.7% last quarter higher than analyst's forecasts of 0.6%. The exports sector also continued showing signs of improvements after the sharp decline we witnessed in the first three months of this year. Exports rose 6.4% in the third quarter as demand from Japan's main trade partners is increasing especially from China that took the U.S place to be Japan's first overseas customer.
The Japanese labor market is showing some improvements even if jobless rate remains relatively high. Industrial production rebounded seven straight months, while exports continued to increase and companies are hiring more workers which helped to see Japan's jobless rate declining to 5.3% in September from 5.5% in August.
Moreover, the Bank of Japan decided in its latest meeting to end its corporate debt buying program by the end of this year as it became easier for companies to acquire fund needed for its business alongside cheerful economic data we witnessed during the last quarter, worth mentioning that the BOJ started its rescue program after lowering its benchmark interest rates to 0.10% in December to support the economy.
Deflation risks remain threatening the economy, having consumer prices declining 2.2% in September from a year earlier as weak domestic demand forced companies to reduce prices to attract consumers. Raw materials and energy prices remain lower than last year's levels but its currently recovering alongside world recovery, so the main threat comes from weak domestic demand that needs better conditions in the labor market to start recovering. Yet, the BOJ expected deflation to persist through fiscal 2011.
Finally, the world's second largest economy is likely to show more signs of recovery as the exports sector that is a main pillar for economic growth is advancing along with rebounding industrial production and increasing investments and capital spending.
