Japan's economy avoided recession last year, performing far better than expected in the fourth quarter of 2002, according to figures published this morning. GDP expanded by 0.5pc in the three months to December, following growth of 0.7pc in the previous quarter, boosted by better demand both at home and abroad. Consumption rose 0.1pc in the quarter, defying economists' expectations exports rose 4.5pc, according to the Cabinet Office figures. Tokyo's benchmark Nikkei 225 index surged 1.2pc on the news to close at its highest level in three weeks. The economy had been expected to shrink by around 0.3pc.
The yen also rallied briefly on the news but quickly steadied off as attention returned to geopolitical worries ahead of today's report from chief UN weapons inspector Hans Blix on Iraq. The yen's gains were also capped by cautious comments from analysts that the gains in the third and fourth quarters will not be sustained this year. They noted that the economy is very reliant on exports, and that demand from the US - Japan's largest export market - could stall if George Bush goes to war with Iraq. //www.fxcentre.com