Japan's first quarter growth revised up

AFP/CNA reports the upward revision in Japan's first quarter GDP growth.

Japan said on Wednesday its economy grew at a brisk 4.0 percent annualised pace in the first quarter of 2008, despite slowing US growth and high oil prices...

Gross domestic product (GDP) grew by 1.0 percent in the three months to March from the previous quarter, up from a preliminary reading of 0.8 percent.

The upgrade was mainly due to higher-than-expected investment by companies in new equipment and factories, with corporate capital spending up 0.2 percent from the previous quarter, against an initial estimate of a 0.9 percent drop.

However, the strong growth is not likely to be sustained.

But many analysts warn that a slowdown is inevitable in the second quarter of 2008 as the global economic climate chills due to the economic problems in the United States sparked by a housing slump and a related credit crunch.

Business investment and brisk exports have been key pillars of the economic recovery.

But now US-bound exports are declining while rising oil prices and a stronger yen are pressuring company earnings, making corporate Japan more cautious about investing aggressively in new facilities.

Indeed, the current account surplus shrank again in April. AFP/CNA reports:

Japan's current account surplus shrank for a second straight month in April as soaring oil prices inflated the value of imports and US-bound exports continued to fall, the government said on Wednesday...

Exports rose 4.9 percent to 6.60 trillion yen as solid demand from the rest of Asia cushioned the impact of falling shipments to the United States.

Imports jumped 13.4 percent to 5.97 trillion yen, boosted mainly by rising energy prices.

Higher energy prices were also behind a deterioration in the US trade deficit in April and a narrowing of China's trade surplus this year, although China's exports did accelerate in May.

If Japan's economy does slow, it would only be following trends elsewhere. The US economy has already slowed and the Federal Reserve's Beige Book reported yesterday that "economic activity remained generally weak in late April and May". Also yesterday, the National Institute of Economic and Social Research reported that UK GDP growth fell to 0.2 percent in the three months ending in May, down from 0.4 percent in the three months to April.