Japanese Economic Boom Driven By China

While less than in most other Asian countries, and less than some analysts had expected, Japanese growth was nevertheless relatively strong, beating both the U.S. and the EU. After adjusting for terms of trade, GDP was up 0.9% or 3.5% at an annualized rate (Before adjustment, it was 1.2% or 4.9% at an annualized rate) compared to the previous quarter.

Compared to a year earlier, the gain was 3.3% in adjusted terms and 4.4% in unadjusted terms. The main reason for the increase was an increased trade surplus, as real domestic demand only increased 1.1% compared to a year earlier. Meanwhile the nominal increase in exports was 36.4% versus only 15% for imports.

A separate report shows the current account surplus in March was 2,534 billion yen (roughly $28 billion) versus only 1,535 billion yen (roughly $17 billion) in March 2009.

This is the flip side of the rapidly decreasing Chinese trade surplus, as it is mainly higher net exports to China that accounts for the increased trade surplus. The high real interest rates in Japan also contributes to higher savings, something which contributes to a higher trade surplus.