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Originally published Friday, March 8, 2013 at 7:53 AM

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Japan economy grew in last quarter of 2012

Japan's economy did better than first thought in the last quarter of 2012, eking out a slight expansion instead of shrinking in a boost for Prime Minister's Shinzo Abe's policies for ending two decades of deflationary stagnation.

AP Business Writer

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TOKYO —

Japan's economy did better than first thought in the last quarter of 2012, eking out a slight expansion instead of shrinking in a boost for Prime Minister's Shinzo Abe's policies for ending two decades of deflationary stagnation.

The government Friday upgraded its annualized growth figure for the fourth quarter to 0.2 percent, suggesting the world's No. 3 economy is emerging from recession.

The change raises growth for full-year 2012 to 2 percent from the originally recorded 1.9 percent. Growth was flat in October-December from the previous quarter.

Preliminary data had reported a 0.4 percent contraction from a year earlier, and a 0.1 percent contraction from the previous quarter.

The revision reflected higher than originally reported corporate spending and private consumption.

Meanwhile, the Finance Ministry said Japan logged a deficit in its current account of 364.8 billion yen ($3.8 billion) in January, the third straight month of deficit.

A sharp weakening in Japan's currency in recent months is seen as a boost for the country's export manufacturers - especially big names such as Toyota Motor Corp. and Sony Corp., but it also has raised costs for imports of fuel and other commodities, sapping the country's usually hefty trade surpluses.

The yen rose to a more than three-and-a-half-year high against the U.S. dollar on Friday, as traders sold dollars in reaction to positive U.S. data and to perceived risks from North Korean threats of retaliation for imposition of sanctions over its nuclear weapons program.

Meanwhile, share prices in Japan also surged, to their highest level in over four years as investors bought export-related shares. The benchmark Nikkei-225 stock index gained 2.6 percent, or 315.54, to 12,283.62, its seventh straight session of gains.

While rallies in overseas markets have helped boost the Nikkei, share prices have also risen in anticipation that an easing of monetary policy and robust government spending under Abe, who took office in late December, would help Japan escape years of deflationary stagnation.

The nomination of Haruhiko Kuroda, a Finance Ministry veteran who is president of the Asian Development Bank, to become Japan's next central bank governor has further lifted sentiment. Kuroda has expressed strong support for Abe's economic strategy and for quickly achieving a 2 percent inflation target set by the central bank and government in January.

So far, prices have shown no signs of rising.

"It is a near certainty that policy will be eased further in April," Julian Jessop, chief economist for London-based Capital Economics, said in a commentary late Thursday. However, he said Kuroda's policies would be unlikely to differ much from the current Bank of Japan governor, Masaaki Shirakawa, despite perceptions that Shirakawa favors a less aggressive policy approach.

The bank may increase the size of asset purchases meant to stimulate the economy, and lengthen their maturity, he said.

But "most of the more radical options, including purchases of foreign bonds and setting a two-year horizon for the inflation target, are unlikely to gain sufficient support, all of which is setting up the markets for some major disappointment," Jessop said.

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