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Japanese uncertainty despite improving growth data

Japanese uncertainty despite improving growth data
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Growth in Japan’s economy has slowed, but less sharply than had been previously thought.

Whilst consumer spending remained unchanged, GDP grew by 1.5 percent in the second quarter, rather than the 0.4 percent reported last month.

First quarter growth had been five percent.

Yet economists are not getting carried away amid the global slowdown and the prospect of a strong Yen hurting exports.

Another question mark on the horizon is the outcome of the ruling party’s leadership contest

Current prime minister Naoto Kan faces a challenge from Ichiro Ozawa in what is set to be a close run battle.

Among the electorate, Kan perhaps enjoys more popularity and public trust than Ozawa. But Ozawa is known as a strategist capable of striking the right deals in political circles. While the markets appear to have no clear favourite, Jesper Koll, head of research at JP Morgan, believes Ozawa may be the more dynamic. He said:

“What Japan needs is a strong leader, someone who can actually coordinate policies rather than somebody you know who can just talk about a lot of things. There’s a lot of problems, there’s a lot of issues here, but we need decisions being made in a credible way. And that’s the one thing that Ozawa is good at.”

Prime Minister Kan has pledged to put a cap on Japan’s public debt.

Ozawa has said he would consider issuing new debt to fund more government stimulus if he replaces Kan at the head of the Democratic Party of Japan and subsequently as head of the government.

Their party’s members of parliament will vote on their new leader next Tuesday.

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