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Leading index of future growth shows Japan to avoid recession

Leading index of future growth shows Japan to avoid recession

Japan's economy may avoid a recession, the government's broadest indicator of future growth showed.
The leading index, a composite of 12 statistics including housing starts and stock prices, rose to 92.8 percent in April from a revised 90.8 percent the previous month, the Cabinet Office said today in Tokyo. The increase signals growth may accelerate over the next two quarters.
Japan will probably extend its longest postwar expansion as a rebound in housing and rising wages support domestic demand, the Organization for Economic Cooperation and Development said this month. A report this week is expected to show that the economy grew more than the government initially estimated last quarter.
``Corporate Japan is in much better shape than at similar stages in previous downturns,'' said Julian Jessop, chief international economist at Capital Economics Ltd. in London. ``We continue to expect the economy to grow by 2 percent or so in 2008 as a whole.''
A Finance Ministry report last week showed that while business investment has fallen for four quarters, the pace of decline is less than half that recorded during Japan's three recessions since 1990. Based on those numbers, the government will probably raise its first-quarter economic growth estimate to an annualized 3.8 percent from 3.3 percent, according to economists surveyed by Bloomberg News.
Wages rose in April for a fourth month, the longest winning streak in almost two years, and residential investment climbed in the first quarter. That demand may help Japan weather a slowdown in shipments to the U.S., its largest overseas market.
Japan's housing starts are recovering after plunging to a four-decade low last year because of a permit logjam caused by government regulations introduced to stop building fraud. The government relaxed the rules in November and housing investment rose for the first time since 2006 in the first quarter.
Hiring of full-time workers has been accelerating since October as companies added permanent staff to comply with new labor regulations. Employers hired full-time staff at twice the pace of part-time workers in April.
``The rise in wages in the first quarter of 2008 reflects higher compensation for full-time workers and an end of the shift to lower-paid part-time workers, thus removing a significant drag on wage gains,'' the OECD said. Japan's economy will grow 1.7 percent in 2008 and 1.5 percent in 2009, it said.


Updated : 2021-05-09 13:40 GMT+08:00