Japan&#39;s Economy Grows... or Does It?

NY Times details the headline Q4 figure:

The Japanese economy grew at an annualized pace of 4.6 percent in the final quarter of 2009, preliminary numbers showed Monday, as a rebound in exports helped alleviate fears of a “double-dip” recession.

As detailed above, the growth was led by exports which jumped an astonishing 20% annualized over the period.

So how can a 4.6% increase not mean the economy actually grew?

The starting point.

Third quarter GDP was reported to have grown 4.8% back in November. As I noted back then, the number looked odd as nominal GDP was negative even with that 4.8% real growth due to deflation.

Now it appears that 4.8% growth never happened.

Tokyo has come under increasing pressure to address wild variations in its readings of gross domestic product: In the third quarter last year, the government initially said the economy had grown a robust 4.8 percent, only to revise that rate down to reflect no growth or decline. The latest numbers, the government says, have been adjusted for more accuracy.

Subtract that 4.8% growth and add in this quarter's 4.6% growth and you get... well, no growth from the level of GDP reported back in Q3.

Over the longer period, we do see a slow normalization. However, anytime nominal growth is under this much pressure in an indebted nation (a nation's debt must be paid back in nominal terms, thus with nominal growth), there is still a lot of concern going forward.