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POLITICAL ECONOMY
Japan economy heats up in first quarter
by Staff Writers
Tokyo (AFP) June 10, 2013


Chinese banks cut lending in May: central bank
Beijing (AFP) June 10, 2013 - Chinese banks scaled back lending in May from April, the central bank said, prompting analysts to warn Monday of threats to growth in the world's second largest economy.

Banks extended 667.4 billion yuan ($108 billion) in new loans last month, less than the 792.9 billion yuan in April, the People's Bank of China said Sunday.

Actual May lending was far below the 821.3 billion yuan expected in a Dow Jones Newswires poll of 14 economists.

"Liquidity conditions were much tighter than expected," investment bank Goldman Sachs said in a research report on Monday.

"If sustained, the tighter monetary and fiscal policy stance is likely to put downward pressure on aggregate demand growth."

Goldman said its forecasts for China's second quarter and full-year gross domestic product (GDP) growth -- now both 7.8 percent -- faced "downside risk".

China has already released other economic figures for May which have raised concern over the outlook for the economy, which grew 7.8 percent in 2012, its worst performance in 13 years.

Among them, the country's industrial output expanded at a slightly slower pace in May while big ticket investment growth also eased, the government said Sunday, in the latest signs of weakness.

Analysts expect China might have to ease monetary policy, perhaps even cutting interest rates, to put economic growth back on track.

Japan's economy grew faster than previously thought in the first quarter, offering renewed hope for Prime Minister Shinzo Abe's growth-boosting plan after two weeks of stock market tumbles.

Japan's Nikkei 225 index had soared about 80 percent in the months since Abe campaigned for the nation's top job in November, pledging to drag the world's third-largest economy out of years of growth-sapping deflation.

But the Tokyo bourse stumbled in recent weeks, plunging about 18 percent to near bear market territory as doubts emerged over the premier's policy prescription of big government spending and aggressive central bank easing.

Markets were unimpressed with the so-called "third arrow" of his sweeping fix for the economy -- structural reforms -- which Abe unveiled last week as part of a blueprint dubbed "Abenomics".

But the 58-year-old leader vowed to press on before mid-term elections next month that are likely to solidify his Liberal Democratic Party's legislative power.

"The upward revision (for economic growth) confirmed that the Japanese economy remains on a firm recovery track," said Hideki Matsumura, senior economist with the Japan Research Institute.

Earlier Monday, the Cabinet Office said revised data showed annualised growth came in at 4.1 percent in January-March, up from a preliminary reading of 3.5 percent and well ahead of many other industrialised nations who are struggling to stoke their economies.

The annualised figures, which show the level of growth if quarterly data were stretched over an entire year, comes as economists sift through recent figures for signs that Abenomics is taking hold.

The IMF has said it expects Japan's economy to grow 1.6 percent in 2013.

The Cabinet Office also said revised figures for real GDP showed Japan's economy grew 1.0 percent in the first three months of the year, slightly better than the preliminary 0.9 percent growth reading.

The improvement was partly due to an upward revision in capital spending, a key measure of confidence among the nation's producers.

In other upbeat data, consumer confidence improved in May over the previous month with the number of Japanese who expect prices to rise sitting at a near five-year high, as Tokyo works to reverse years of falling prices which have crimped private spending and business investment.

"We expect the economy will continue to grow for now but consumer spending may be dampened in the current quarter after a sizeable adjustment in the Nikkei index," Matsumura said, referring the recent drop in the Tokyo stock market.

However, the Nikkei bounced back back on Monday with a 4.94 percent jump, the biggest one-day boost since March 2011 when Japan was pounded by a quake-tsunami disaster and subsequent nuclear crisis.

Also Monday, official figures showed Japan posted a surplus on its current account for the third straight month in April, as the weaker yen helped boost the value of income from overseas investments.

Japan's surplus doubled year-on-year to 750 billion yen ($7.6 billion) in its current account, the broadest measure of trade with the rest of the world, helping offset a widening trade deficit.

Japan's import bills have soared in the wake of the Fukushima atomic crisis two years ago, which saw Tokyo turn to pricey fossil-fuel alternatives after switching off the disaster-struck country's nuclear reactors.

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