MOVING INTO HIGH GEAR:
Economy Marks Biggest Quarterly Growth in 23 Years
JULY 9, 1996
Factors behind the biggest quarterly growth in more than two decades include strong personal consumption and the effects of stepped-up public works spending undertaken last year.
The last time quarter-to-quarter growth reached 3% was the first quarter of 1973, when Japan was in the midst of a "remodeling" boom to develop outlying regions.
Economic growth in real terms for fiscal 1995 (April 1995 to March 1996), meanwhile, reached 2.3% over the previous year, emerging from four consecutive years of virtually zero growth.
"I think we can safely say that the economy has finally entered a phase of self-propelled recovery led by private-sector demand," a senior EPA official commented, adding that the government projection of 2.5% real growth for the current fiscal year is now well within reach.
The domestic demand component of GDP growth was 3.4%, while the external demand component was minus 0.3%. Supporting the recovery were increased spending on public works implemented in September 1995 and robust housing starts.
The fact that 1996 is a leap year also contributed to boosting consumption. The EPA estimates that the extra day in February pushed up real GDP by 0.5 points.
Personal consumption grew by 2.4% on a quarterly basis, thanks to strong sales of consumer durables, particularly personal computers. The margin of the increase was 0.6 points higher than in the previous quarter.
Housing starts, meanwhile, jumped by 8.4%--a 7.2 point leap from the final three months of 1995. Private capital investment grew for the fifth consecutive quarter.
Nominal GDP growth during fiscal 1995 was 1.8%--lower than the real rate due to falling prices. Growth in real terms outgained nominal growth for the second straight year.
Japan's current account surplus as a share of nominal GDP in fiscal 1995 fell by 0.7 points from the previous year to 1.9%--the first time in five years that the share dipped below 2%. The drop indicates that Japan's external surplus is decreasing at a rapid pace.
| 1995 | 1996 | ||||
|---|---|---|---|---|---|
| FY 1995 | II | III | IV | I | |
| Real GDP | 2.3 | 0.6 | 0.6 | 1.2 | 3.0 |
| Personal consumption | 2.7 | 0.7 | 1.2 | 0.6 | 2.4 |
| Private housing investment | -6.7 | -6.7 | -5.7 | 7.2 | 8.4 |
| Private plant and equipment investment |
5.1 | 2.8 | 0.6 | 2.3 | 1.5 |
| Increase in private inventories | -- | -25.3 | 75.0 | 40.9 | 11.0 |
| Government consumption | 1.6 | -1.2 | 0.2 | -0.4 | 3.3 |
| Government investment | 10.0 | 3.2 | 5.8 | 6.9 | 8.6 |
| Increase in public inventories | -47.7 | -59.1 | -37.3 | -48.8 | 1235.6 |
| Net exports of goods and services | -52.0 | 3.9 | -32.1 | -50.7 | -59.9 |
| Exports of goods and services | 4.7 | 4.2 | -1.6 | 1.3 | 0.1 |
| Imports of goods and services | 15.1 | 4.3 | 3.0 | 6.4 | 2.8 |