Real GDP up an annualized 4.6%

Japan's real gross domestic product surged an annualized 4.6 percent during the October-December period to keep the domestic economy ahead of China, according to Cabinet Office figures Monday.

But the growth was due largely to government stimulus measures whose effects will not last much longer, economists said.

Preliminary estimates show that real GDP grew 1.1 percent in the October-December period from the previous quarter. The increase marked the third straight quarter of growth, supporting the view that the economy has indeed bottomed out.

However, economists warned that domestic demand has yet to return to a self-sustaining recovery track, and growth for the January-March quarter will likely slow after the effects of economic boosters, such as subsidies on hybrid vehicles and incentives to buy flat-screen TVs and other household appliances, taper off.

Yasunari Ueno, chief market economist at Mizuho Securities Co., had a gloomier outlook.

"The economy will likely fall back into negative growth during the April-June 2010 period" after a recoil from the effects of various policies, coupled with the negative impact of a strong yen and the suspension of public works projects, Ueno said.

China is expected to soon overtake Japan as the world's second largest economy, but annual GDP figures for 2009, also announced Monday, showed that Japan has managed to retain its No. 2 ranking in terms of nominal GDP.

Japanese officials warned of a possible downward revision in the GDP figures.

In the October-December quarter, personal consumption, which accounts for more than 50 percent of real GDP, was up 0.7 percent from the previous quarter, marking the third consecutive period of growth. Officials attributed the rise to higher sales under the economic stimulus program.

Exports rose 5.0 percent from the previous quarter, the third consecutive period of growth, while corporate capital spending increased 1.0 percent from the previous period, the first growth since January-March 2008.

However, public works fell by 1.6 percent on a quarterly basis, marking the second consecutive quarter of decline.

Housing investments fell by 3.4 percent, the fourth consecutive quarter of decrease, but the rate of decline was smaller than the 7.8 percent during the July-September quarter.

The value of real GDP in the October-December quarter was 532 trillion yen on an annualized basis, a slight improvement from the 519 trillion yen marked during the January-March 2009 quarter after the global financial crisis that flared with the collapse of Lehman Brothers.

The latest figure was still much lower than the peak of 567 trillion yen marked during the January-March quarter of 2008.

Nominal GDP, which reflects price fluctuations, grew 0.2 percent in the latest quarter, or 0.9 percent on an annualized basis. It was the first increase in seven quarters.

At the same time, the GDP deflator, which indicates price trends, was down a record 3.0 percent from the same period the previous year.

Real GDP for 2009 dropped 5.0 percent from the previous year and fell 6.0 percent on a nominal basis.

The drops both represented the second consecutive year of decline. The rates of decline were both the largest since comparable records were first taken in 1955.

In terms of dollar value, the United States remains the largest economy, worth $14.3 trillion. Japan is second at $5.1 trillion, followed closely by China at $4.9 trillion.