So Japan’s GDP of 1.5% growth quarter-on-quarter at the end of September makes very welcome reading, more so as it is the first positive quarterly growth figure in more than a year and is the equivalent of an annualised growth rate of 6%.
There are also signs that growth may continue, as exports contributed just over one-third of this growth.
Further positives come from the ongoing government spending on infrastructure projects along its north-east coast that was devastated by the tsunami and earthquake in March; the Japanese government has also passed several measures aimed at countering the impact on exporters of its strong currency; domestic demand added 1.1% to the growth figure indicating that domestic consumption is in a reasonable state.
However, there are still downsides because, for example, given exports make up over one-third of the country’s growth the lack of buying power from most of the rest of the world does little to make future export-oriented growth sustainable.
Also, the rise in Q3 GDP is more likely because of the bounce-back of its own factory output following the shutdown after the tsunami and earthquake back in March.
At least two analysts have also expressed their views that growth was starting to peter out by the end of the quarter, with industrial production falling by 4% in September, the first decline since March.
Japan, therefore, even with some good economic numbers for Q3, remains a stock-pickers market and Japanese companies have proved as resilient as their Western counterparts with stronger cash flows and good earnings numbers.
Cheap stocks do not equate to good value though the stock selection picture may improve over the medium term if corporates can continue to grow their books and the domestic market continues to consume.
