Japan Shows Some Promise Say Economists

One of the few bright spots in an otherwise grim global economic forecast was Japan’s recent performance.

According to IHS Global Insight Economists, that nation’s real GDP increased at a 4.1 percent annual rate in the first quarter, led by gains in private consumption, government spending, and net exports.

Yet, a weak labor market, sluggish income growth, and rising electricity prices will limit growth during the remainder of 2012. Japan’s real GDP is projected to increase 2.4 percent this year and 1.8 percent next year.

Other findings suggest that broad-based deceleration in emerging markets caused by the sharp slowdown in exports to Europe and the United States, and the lagged effects of monetary tightening in 2010 and 2011.

China’s slowdown in April prompted the government to shift policies to a more aggressive pro-growth stance. Policy stimuli will include increased credit availability, lower interest rates, and additional spending on infrastructure, low-cost housing, and energy conservation programs. Based on its track record, China should be able to achieve a soft landing. Forecasts of 2013 growth in China, India, Brazil, and Russia have been revised downward.

“The broad-based nature of the global growth slowdown is a source of concern,” said IHS Global Insight Economist Sara Johnson. “A lot will depend on the robustness of the policy response. Most policymakers (outside Europe) are either easing or have signaled their willingness to do so.”

Johnson added that such action will reduce the risk of another world recession—now assessed at a 25 percent to 30 percent probability.

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