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Japan's economy may have posted 2nd best stretch of post-war growth

The index of coincident economic indicators rose a preliminary 1.9 points to 117.6 in August from the previous month, the level seen in March 2014

Reuters  |  Tokyo 

Shinzo Abe
Shinzo Abe

Japan's likely posted its equal second-best stretch of uninterrupted post-war growth, a index for August showed on Friday, a nod to strong global demand and premier Shinzo Abe's aggressive stimulus measures.

The latest reading comes as Abe heads to a general election later this month and puts his "Abenomics" policies in the spotlight. However, despite the strong headline number, analysts say the benefits of growth have failed to reach broader sectors of the with generally anaemic leaving behind.

The index of coincident economic indicators rose a preliminary 1.9 points to 117.6 in August from the previous month, the level seen in March 2014, the Cabinet Office said. This would mark 57 straight months of growth, matching the second-best stretch of expansion since World War Two, seen between 1965 to 1970.

"I don't feel the has been growing and I'm not in a mood to spend on luxury things. I need to save money for my child's education and for when I retire as I don't think I will get enough pension to make ends meet," said Satoko Sakuma, 57 years old, a part-time worker in the elderly care industry.

The is used to measure the state of the and is among indicators the uses when deciding whether the is expanding or in It includes a range of readings such as factory output, and

Under the government's definition, the has been in an expansion since December 2012, when Abe came into office. The posted its best stretch of consecutive monthly growth of 73 months from February 2002 to February 2008.

Japan's expanded at an annualised 2.5 per cent in the second quarter as consumer and company spending picked up, with steady growth likely to be sustained in coming quarters.

But while there has been some economic momentum, it remains historically modest: the grew an average 1.2 per cent during the current expansion, much slower than 11.4 per cent average growth during the 1965 to 1970 expansion, SMBC Nikko Securities said.

Other data on Friday showed Japanese workers' rose in August from a year earlier in a sign of a gradual pick-up in household income.

And a Bank of survey showed households' mood improved in September from three months ago, though fewer of them expected prices to rise a year from now.

The jobless rate, which was at 4.3 per cent when Abe took office, fell to 2.8 per cent in August. Corporate earnings rose 75 per cent during the period, as the yen fell more than 30 per cent and the Nikkei stock average doubled in value.

"Companies have enjoyed record profits but aren't growing much," said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

"Most of the increase in corporate profits came from factors like falling oil costs and a weak yen, and the recovery in sales wasn't as strong as past economic expansions. This is making companies cautious of raising "

Some economists say companies may keep hoarding cash as they see little growth prospects in Japan's rapidly ageing society.

"It's hard to predict the future so companies tend to save cash. They can't raise prices as they may lose customers," said Yoshiki Shinke, chief economist at Dai-ichi Research Institute.

"It would be better if the sees growth stabilise above its potential."

First Published: Fri, October 06 2017. 17:54 IST