Basically I think this is consistent with a lot of other data we have been seeing of late which suggests that the resilience in the export sector - driven largely by stronger than anticipated growth in some other Asian economies - is holding Japan back from falling into recession at the moment. As Claus noted yesterday, Japan's leading index, which is a composite derived from 12 indicators including housing starts and stock prices, also rose in February (to the 50% mark), just reaching the threshold that indicates growth rather than contraction over the next two quarters, according to the Cabinet Office yesterday. The index has been below 50 in eight of the past 12 months.
As such conditions continue fluctuate, and the Japanese economy continues to eke out growth, but it is very hard to see how long this new found lease of life will last, and it is also important to note that while these indicators are bouncing back, they are normally bouncing back from what have been very low levels.
In this context it is perhaps worth noting the striking parallel which exists between what is currently happening in Japan and what is happening in that other important export driven economy - Germany. German growth is more or less holding up at the present time, thanks again to stronger than expected export growth to emerging markets, this time in Central and Eastern Europe. And all of this is taking place as credit conditions tighten across the OECD economies and funds flood out in search of higher yields in some of the planets most rapidly growing economies, and of course as these economies then need to import from countries like Japan and Germany to feed their investment projects.
