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Japan's economy leaves recession

Japan's economy leaves recession

Japan has come out of recession after its economy grew by 0.9% in the April-to-June quarter.

The growth comes after four consecutive quarters of contraction.

Correspondents say the rise is due to a huge government stimulus package and it is unclear whether the momentum will be sustained when this is concluded.

Recent figures show other economies coming out of recession, including Germany, France and Hong Kong, a sign the global slowdown is easing.

Despite Japan exiting recession, the country's main share index, the Nikkei, fell back as the rate of growth was not as large as analysts had hoped.

If Japan's latest quarterly rate were maintained for a full year, the economy would grow 3.7%, but this was less than market expectations of 3.9%.

The Nikkei ended down 329 points or 3.1% to 10,269.

'Positive contribution'

Japan officially fell into recession last year and there was a dramatic fall in growth in the January-March period as the world economic slowdown hit Japanese exports hard.

Government stimulus measures totalling $260bn (£159bn) helped to boost the economy, including cash handouts and subsidies to buy energy-efficient cars and home appliances, the BBC's Roland Buerk in Tokyo says.

Manufacturers also benefited from recovering demand in China and other markets, with overall exports up 6.3% during the quarter.

But Japan could still face a long road to sustainable recovery, our correspondent says, with domestic private consumption rising only 0.8% despite the stimulus measures.

Seijiro Takeshita, director of Mizuho Financial, Japan's second largest banking group, told the BBC that the Japanese economy was now staging a "true comeback".

"We are definitely getting out of the excessive pessimism that we have been seeing... however, a lot of big questions remain, namely private consumption," he said.

"We know this time it was good, but that was due to a lot of government stimulus spending."

European recovery

Japan is heavily reliant on its exports.

The slowdown in the US has hit it hard as American consumers have limited their spending. In a recent Bank of Japan report, the central bank underlined its cautious view of the economy.

While it said conditions in the Japanese economy had stopped worsening, it warned that unemployment would stay high and consumer spending low.

Last month, the bank forecast that Japan's economy would shrink by 3.4% in the 12 months to 31 March 2010.

The French and German economies both grew by 0.3% between April and June, bringing to an end recessions in Europe's largest economies that have lasted a year.

Analysts had not expected the data, suggesting recovery could be faster than previously expected.

And Hong Kong recorded growth of 3.3% in the three months from April to June.

That data was also better than had been expected, with the government subsequently increasing its forecast for growth in the whole year.

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