Japan's economy expanded at an annualized rate of 7 percent in the last quarter of 2003, with export-oriented large manufacturers providing the main thrust of growth. Whether this will lead to a broad and enduring recovery remains to be seen, however. The export boom will fizzle out if overseas demand cools off. Consumer spending, the main engine of growth, will not regain its vigor unless jobs and incomes increase.
The 7 percent annual growth rate is the highest in 13 1/2 years, exceeding general expectations. Indeed, the figure itself looks almost surreal as if the high growth of the roaring 1980s were returning. On a quarterly basis, gross domestic product for October through December expanded 1.7 percent in real terms, maintaining its upward trend for all of 2003.
A combination of three factors -- exports, business investment and consumer spending -- pushed up GDP in the last quarter. It appears that a virtuous cycle of sorts was at play: Overseas sales stimulated capital spending, and this had a ripple effect on consumer demand.