Hesitant signs of recovery for Japanese economy

According to some commentators, the Japanese economy is showing signs of turning the corner of recession. The Nikkei 225 stock index recently broke the 10,000 barrier for the first time in eight months, with steelmakers and financial stocks leading the trading.

News of the Nikkei breaching the “ichiman” mark comes after further news reports appear to show signs of recovery beginning. Earlier this month, the country revised its GDP forecast from a 4 per cent contraction to 3.8 per cent. Corporate capital spending in the first quarter fell by a smaller-than-expected 25.3 per cent while bankruptcies dropped last month for the first time in a year.

Data released earlier indicated that Japanese industrial production rose 5.2 per cent in April from the previous month, the fastest rise in more than half a century. The drop in exports also eased in April, falling 40.6 per cent year-on-year compared with a 46.5 per cent decline in March.

But despite the encouraging signs, trading remains difficult. Japanese machinery orders – a key indicator of manufacturing confidence – are still fluctuating, falling unexpectedly in April as manufacturers delay expansion plans because of continuing tough trading outside of Japan. News from China last week showed a larger-than-expected drop in May imports and exports.

The signs are positive, and while the economy still has a very long way to go, there is very real optimism that we are at least on the road to recovery. New technologies – and in particular, “Green” technologies – are looking to become very important contributors to the “new” Japanese economy and we are already seeing Japanese companies like Mitsubishi Electric achieving considerable international success in this field.

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FT.com / Markets / Asia-Pacific – Nikkei breaches 10,000 level