Japan gains 1% growth while U.S. protectionist risks loom

By Tetsushi Kajimoto and Stanley White, taken directly from Yahoo News
Summarised for NEBA clients

TOKYO (Reuters) – Japan’s economy grew for a fourth straight quarter in the final three months of last year as a weaker yen supported exports, but tepid private consumption and the risks of rising U.S. protectionism cast doubts over a sustainable recovery.

Japan’s export-driven growth over the quarter has helped fill the economic shortfall left by anaemic domestic demand. Economy Minister Nobuteru Ishihara said Japan remained in a moderate recovery trend and expected the positive momentum to be maintained, but he sounded a cautious note on the outlook.

*Attention should be paid to uncertainty over global economy and fluctuations in financial markets.

Analysts were equally cautious about the outlook even as a weak yen has provided exports a lift.

The fact that the economy grew a fourth straight quarter on the back of exports should be considered a passing mark for policymakers.

The corporate sector strength has not spread to households who are facing higher costs of living and future uncertainty. The key is how price-adjusted real wages grow to support private consumption from now on.

PROTECTIONIST RISKS

Underlining a struggle to accelerate inflation to the Bank of Japan’s 2 percent target, the GDP deflator, a broad gauge of prices, fell 0.1 percent in October-December from the same period a year earlier, down for a second straight quarter of declines.

Just the same, some economists saw risks stemming from weak domestic demand as well as trade protectionism.

Trump’s protectionist policies, which have rattled global markets and regional economies reliant on the vast U.S. market, have kept investors guessing about the outlook for world trade, investment and growth.

Despite the positive diplomatic overture, the Trump-Abe meeting on the weekend has done little to allay deeper concerns about growing U.S. protectionism.

(Reporting by Tetsushi Kajimoto, Stanley White and Chang-Ran Kim; Editing by Shri Navaratnam and Sam Holmes)

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