THE ECONOMY ZOOMS AHEAD:
Private Consumption Spurs 3.9% Annual Growth

March 18, 1997

Japan's gross domestic product for the October-December quarter of 1996 grew by 1.0% in real terms over the preceding three months, or an annual rate of 3.9 %, according to preliminary statistics released by the Economic Planning Agency.

The highest growth rate in three quarters was ascribed to buoyant personal consumption, particularly of automobiles, and the eighth consecutive quarter of expansion in private plant and equipment investment.

"Economic growth is being fueled by private-sector demand," an EPA spokesperson said, "and the rate of real economic growth is certain to reach 2.5% in fiscal 1996 (April 1996 to March 1997), as projected by the government."

Highest Growth in Five Years
Nearly all sectors of the economy showed gains, except for public-sector spending. Personal consumption made big gains as the previous quarter's figure was dampened by the E.coli food poisoning scare.

New car models and the accompanying advertising blitz pushed up sales of consumer durables. Gains were also made in sales of personal computers and cellular phones, as well as in phone use.

Capital spending grew by 2.1% over the preceding quarter, maintaining the pattern of robust growth over the past couple of years. Particularly big gains were achieved by auto- and machinery makers among manufacturers and by firms in the transport, telecommunications, and service sectors among nonmanufacturers.

The benefits of the recovery appear to be accruing to small and medium-sized enterprises as well. Government spending contracted by 7.5%--the biggest decline in nearly 23 years.

The domestic demand component of the 1.0% real GDP growth was 0.6 points and the external demand component was 0.4 points.

The fourth quarter figure produced a growth rate of 3.6% for 1996 as a whole, both in nominal and real terms. The real figure is the highest since 1991 and the highest of the major industrial countries.

The growth was propped up in large part by heavy public works spending during the first half of the year.

Economic Growth Rates (%)

	1995	1996
	IV	I	II	III	IV
Real GDP	1.3	2.0	-0.3	0.3	1.0
Personal consumption	1.0	2.0	-1.0	-0.2	1.2
Private housing investment	7.6	6.0	5.9	-0.5	4.0
Private plant and equipment investment	2.5	0.8	1.4	2.0	2.1
Increase in private inventories	19.2	1.9	-48.1	-8.5	-25.9
Government consumption	0.1	0.8	0.1	1.3	0.6
Government investment	3.9	6.5	2.1	-2.0	-7.5
Increase in public inventories	74.5	243.9	-58.3	-68.2	-42.3
Net exports of goods and services	-41.7	-55.7	-82.0	507.8	147.5
Exports of goods and services	1.0	-0.7	0.1	1.6	4.3
Imports of goods and services	4.7	2.0	1.8	-0.3	1.1