Japan economy averting recession in Q3

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TOKYO, Nov 12 (AFP): Japan's economy is expected to have returned to positive growth in the third quarter, averting recession thanks to higher corporate investment and brisk exports to emerging markets, analysts say.
The world's second-largest economy has been gradually recovering from a slump stretching back over a decade but the revival stalled in the second quarter of 2007 as firms cut spending on new factories and equipment.
A second consecutive quarter of negative growth would have seen Japan slip back into recession by the most widely accepted definition.
But market forecasts are for the government to report Tuesday that Japan's gross domestic product grew by 0.4 per cent in the three months to September from the previous quarter and at an annualised rate of 1.8 per cent.
"We anticipate external demand drove the economy entirely," predicted Morgan Stanley economist Takehiro Sato.
Recent weakness in the housing sector due to the introduction of tighter building regulations means that overall domestic demand is likely to have been sluggish in the third quarter, he added.
"Brisk Asian demand buoyed manufacturing industries, which just about buttressed the Japanese economy in the quarter," said Sato.
Japan's economy shrank by 0.3 per cent in the three months to June from the previous quarter and at an annualised pace of 1.2 per cent, the first contraction in three quarters.
A return to positive growth would be welcomed by the central bank but it is unlikely to be enough to justify another interest rate rise yet amid stubborn deflation and worries about the health of the US economy, analysts said.
The Bank of Japan is due to announce the outcome of a two-day monetary policy meeting Tuesday just hours after the release of the GDP data, but most analysts now think another rate hike is unlikely before early 2008.
Norinchukin Research Institute senior economist Takeshi Minami agreed that third-quarter growth is likely to have been powered by firm exports.