Friday, June 11, 1999
The June 10 Economic Planning Agency announcement that Japan's gross domestic product grew an annualized 7.9 percent in the January-March period took practically everyone by surprise. Although the jump in public sector spending was largely anticipated, the strength of consumer expenditures and capital spending was not. Two reactions have followed.
First, most analysts express skepticism about the numbers, especially since they are so much at variance with other recently released data. While the figures are open to interpretation, the critical point is that GDP data generally are of better quality than those numbers that precede them. They are comprehensive across more types of economic activity and are more carefully adjusted for price changes, seasonal factors and other variables. This fact implies that some of the criticism of the latest figures reflects a failure on the part of analysts to recognize the tentative nature of the earlier data.
The second reaction acknowledges that the figures mean something that the Japanese economy was, and is, in better shape than most analysts had realized and may have been for some time. The newer, more comprehensive numbers mean that consumer spending is growing, not shrinking, for example. To the extent that seasonal adjustment factors tended in this instance to lead to an exaggerated first quarter growth rate, then consumer spending was stronger than previously thought in previous quarters. As this reality sinks in, attitudes toward Japan in Washington and elsewhere are likely to become more optimistic.
The GDP statistics will be the subject of a more detailed treatment in JEI Report. The online version be available to subscribers beginning June 18.
EI's Spin on the News" are the opinions of one of more members of JEI's staff and do not necessarily represent the views of the organization.