EDITORIAL: GDP data in perspective

Data released Monday shows that the domestic economy is benefiting from the worldwide recovery. Real gross domestic product grew at an annualized rate of 4.6 percent in the October-December quarter of 2009 compared with the previous three-month period. The government confirmed that the economy is looking up, even though it is not yet out of the woods.

However, the figure for nominal GDP showed a rate of annual increase of only 0.9 percent due to deflation. The benefits of the economic rebound feel elusive. It is nevertheless heartening to know that real GDP expanded for the third consecutive quarter while nominal GDP grew for the first time in seven quarters.

Japanese exports received a big boost, courtesy of rising demand in China and elsewhere in Asia. The region is leading the global economic recovery. Auto and other exports also picked up in the U.S. and European markets.

In the same period, China posted year-on-year growth of 10.7 percent in real terms. The U.S. economy expanded by an annualized 5.7 percent from the previous quarter while the 16 nations in the euro zone posted an average 0.4-percent growth. Both the U.S. and European economies grew for the second consecutive quarter.

Japan is benefiting from the growing ripple effect created by the upturns of other major economies.

Domestic demand was lifted by continued growth in consumer spending spurred by the "eco-point" incentive program for purchases of energy-efficient home electric appliances along with tax breaks and subsidies for eco-friendly new vehicles. The report also showed a slowing of the decline in housing starts that has been a major drag on the economy.

Corporate investment in factories and equipment, a key indicator, increased for the first time in seven quarters. Business investment is rebounding in industries ranging from autos and personal computers to IT-related software. The improving investment picture represents an encouraging development, although it doesn't warrant unreserved optimism.

Since the beginning of this year, both the currency and stock markets have been, by and large, stable. There are still causes for concern, including the murky outlook of the U.S. economy and signs that China may tighten its monetary policy.

But it is safe to say that the danger of the Japanese economy slipping into a double-dip recession is receding.

The economy, however, is not showing sufficient strength to continue recovering without assistance. Industrial production is still 20 percent below its peak, while machinery orders are 30 percent off their all-time high. Employees' wages posted the largest-ever drop in 2009, and the unemployment rate remains above 5 percent. The effects of the government's economic stimulus measures will eventually wear off.

The administration of Prime Minister Yukio Hatoyama needs to act swiftly to flesh out the details of the new strategy for economic growth it announced late last year. It should focus its policy efforts on stimulating capital investment and job creation in the private sector.

The government should also do more to promote cutting-edge technologies in such areas as the environment while trying to stoke job and income growth by shoring up service industries, especially health-care, welfare and nursing-care services. The government should also advance the trade liberalization process to give a stronger incentive for companies to expand into emerging markets.

In 2009, China came close to catching up with Japan in nominal GDP. It is certain that China will overtake Japan as the second largest economy during this year.

It will become even more urgent for Japan to shift to a knowledge-intensive economy, taking advantage of its advanced technologies to provide a wide variety of products and services with high added value.

Companies that must serve as the engine of economic growth have no time to waste on waiting for additional policy support from the government. They need to make aggressive efforts to grab new business opportunities to help put the nation's economy on a path of self-sustaining recovery.

--The Asahi Shimbun, Feb. 16