Japanese growth beats expectations

The British economy sank further down the international league table yesterday when Japan announced stronger-than-expected growth figures.

The Japanese economy, which was hard hit by the slowdown in international trade, grew by a better-than- expected 1.2 per cent between July and September. The figure, equivalent to an annual growth rate of 4.8 per cent, represents Japan's best performance in many years. It is also an acceleration of the 0.7 per cent quarterly rise seen in the spring.

Japanese companies are beginning to rebuild inventories and exporters are enjoying the benefits of an improvement in international trade. Business investment has also seen a resurgence.

Even so, most observers agree that Japan's economy is dependent on a variety of fiscal and monetary stimulus measures, and yesterday Tokyo reportedly edged closer to introducing a new $30bn (£18bn) package to maintain the pace now being recorded.

Such a move would be a great relief to policymakers, in the UK and US especially, who have worried aloud about nations withdrawing such stimulus packages prematurely, so-called "exit strategies". President Barack Obama is touring the Far East, partly in an attempt co-ordinate economic policies.

The Japanese Cabinet will discuss proposals for a fresh boost today, but no announcement is expected.

Japan has also gained from the renewed expansion in her close trading and investment partner China. Dominique Strauss-Kahn, the managing director of the International Monetary Fund (IMF), said yesterday that China would lead the world's economic recovery. The IMF forecasts that China will grow by 9 per cent in 2010: "Higher Chinese domestic demand, along with higher US saving, will help to rebalance world demand and assure a healthier global economy for us all."