[an error occurred while processing this directive]
BBC News
watch One-Minute World News
Last Updated: Friday, 9 December 2005, 11:09 GMT
Japan's economic recovery slows
Japanese production line worker
The nuts and bolts of Japan's economy are being scrutinised
Japan's economy grew by less than previously forecast during the third quarter, because many firms ran down their stocks of unsold goods.

Gross domestic product (GDP) rose by 0.2% in the three months to the end of September, less than the forecast 0.4%.

Instead of voicing concerns, analysts said it pointed to an improved economic environment as firms adjusted to stronger consumer and business demand.

With their stockpiles depleted, firms will now have to boost production.

"A fall in inventories is actually a bright sign for the economy," said Economics and Financial Services Minister Kaoru Yosano.

Spending power

Japan has been turning around its economy, the world's second-biggest.

The unemployment rate is coming down, consumers and firms are more confident about the future and are spending and investing more, while a period of deflation seems to be drawing to a close.

Japanese shares have been among the world's best performers this year because investors are betting that company order books will start to fill up and employee wages will rise.

During the third quarter, capital investment rose by 1.6%, and private-sector consumption, one of the main drivers of growth, increased by 0.4%.

"The recovery in employment and incomes should continue bolstering consumption ahead," said Ryutaro Kono, an economist at BNP Paribas.

"And the recent machinery orders data suggests capital spending will maintain an uptrend into the fourth quarter onwards," he said.

According to Friday's figures, if the economy continued to grow at its current pace, Japan's GDP would expand by 1% this year.

"It is difficult to find any part of the economic puzzle that would lead you to be less confident about the full-year 2006 outlook than you were six months ago," said Richard Jerram, an economist at Macquarie Securities.

Better times for Japanese economy
29 Nov 05 |  Business
Japanese deflation appears to end
25 Nov 05 |  Business
Japan's foreign investments grow
14 Nov 05 |  Business
Domestic sales aid Japan's growth
11 Nov 05 |  Business
Japan sees deflation years ending
31 Oct 05 |  Business
Upbeat Japan sees economy pick up
30 Sep 05 |  Business

The BBC is not responsible for the content of external internet sites


Americas Africa Europe Middle East South Asia Asia Pacific