TOKYO (AFX-ASIA) - Fourth quarter GDP rose 0.8 pct from the previous quarter but while at the upper end of market expectations, the outlook looks difficult and it is unlikely that this performance can be maintained over the first half.
GDP fell 0.6 pct in the September quarter, the Cabinet Office said.
December quarter GDP rose an annualised 3.2 pct, while the fourth quarter GDP deflator was down 1.7 pct year-on-year.
Economists said that while the fourth quarter figures were boosted by higher than expected capital expenditure, the numbers for the next two quarters are set to worsen as overseas and domestic demand conditions ease.
Market reaction was limited, with the stockmarket down sharply after declines on Wall Street Friday and the yen falling as investors took the view that the government has effectively sanctioned depreciation in an attempt to support the economy.
A Cabinet Office official said robust capex supported the rebound in the fourth quarter, overcoming a downturn in consumer spending and the sustained fall in net exports.
Capex rose 6.8 pct quarter-on-quarter, while consumer spending fell 0.6 pct in the three months and net exports contributed negatively to GDP for the second quarter in a row.
The Cabinet Office also noted relatively large declines in wage incomes, which fell 0.8 pct year-on-year in the fourth quarter. State Minister for Economic and Fiscal Policy Taro Aso said it is uncertain whether Japan can meet the official target of 1.7 pct GDP growth in the year to March 2002 but he has "no immediate plan" to review the forecast.
Asked whether Japan can meet the GDP target for the next fiscal year, Aso said: "It is uncertain... relative to" the prospect for achieving the 1.2 pct growth target for the year to March 2001.
"Under normal circumstances, increased corporate profits result in hikes in capital spending, rises in employment and wages," he said. However, such a positive outcome has not emerged in the present business cycle as employers "who are still engaged in balance sheet adjustments have been prioritizing debt repayment," he said.
"Such a situation is not likely to change for the time being," he added.
For his part, Finance Minister Kiichi Miyazawa said the government can attain its year to March 1.2 pct GDP growth target, adding that he expects the figure to come in "a little over" that level.