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Japan Economy Watch
The economy grew 0.9 percent quarter on
quarter, unchanged from the government's initial
survey on Feb. 14, and at a year on-year rate of
 while
the year on year rate had now
dropped back somewhat from earlier peaks,
growth is still holding up reasonably well.
The reasons for this are not hard to identify,
since net exports, or the difference between
exports and imports, added 0.5 percentage
point to growth, an upward revision from the
0.4 percentage point contribution first
which compares movements in quarterly GDP growth with
net export contributions to growth - is that co-movement
between these two is quite strongly correlated, and that the
nose dive in GDP in Q2 2007 was closely associated with a
weakening in the export contribution.
 All
of this is already rather old hat, but what
is perhaps rather surprising to note in the
above chart is that Japanese GDP and
export growth has actually IMPROVED in
the period following the sub prime outbreak
in August (and despite a significant
construction slump in Japan) when
compared with performance just before the
problem arrived.
 This
would seem to suggest, to say the very
least, that Japanese growth is now
significantly "decoupled" from the US - in the
sense that exports to that market don't carry
as much weight - but is most definitely NOT
"decoupled" in the sense of being driven by
autonomous domestic demand lead growth.
 Not
only this, but Japanese exports are
performing relatively well on the back of
rising demand in the rapidly developing
emerging economies. This phenomenon is
being virtually replicated in Germany, that
other ageing-society economy which is
driven by export demand. So we need to
follow carefully what happens next here, to
see what can be learnt.
 Investment
in factories and equipment grew
2 percent from the previous quarter, less
than the initial estimate for a 2.9 percent
gain in line with last weeks Finance Ministry
Consumer spending is another area that has
been holding up rather better than expected,
and this despite plumetting consumer
confidence indexes, and rose 0.2 percent on
the quarter,and 1.2% year on year,
unchanged from the preliminary GDP survey.
Household consumption isn't growing at rates that
should make us sit up and pay strong attention,
and it certainly isn't going to power a consumer
driven expansion, but it is holding up acceptably
well under the circumstances.
Again, this is another
data point to follow
closely in the coming
months to see what it
tells us about how
things in Japan are
likely to evolve.