Japan squeaked out of recession in the last quarter with modest growth that, analysts say, would provide a foundation for a strengthening economy.

Pedestrians cross a street in the Ginza shopping district in Tokyo, on January 14, 2013. Japan squeaked out of recession in the last quarter with modest growth that, analysts say, would provide a foundation for a strengthening economy.

The 0.2 percent rise in GDP on an annualised basis in the quarter to December will be welcome news for Prime Minister Shinzo Abe, whose first few months in office have seen renewed optimism over the state of the world's third largest economy.

A preliminary figure of a 0.1 percent contraction between October and December was revised upwards to flat growth on quarter.

Japan's economy had shrunk for two consecutive quarters from April through September as export demand weakened due to financial turmoil in key market Europe, a strong yen and a diplomatic row with China.

Abe's mantra since being swept to power in December has been one of pumping life into a flaccid economy and turning around 15 years of growth-sapping inflation with the premier announcing huge debt-funded spending packages.

The country has seen a mixed bag of economic data lately, with the unemployment rate edging down to 4.2 percent in January and the struggling economy remaining mired in deflation, while industrial output showed a modest rise of 0.1 percent in January from the previous month.

However, the yen has weakened in recent months on expectations that the Japanese central bank under political pressure would adopt an aggressive monetary easing policy, helping make the nation's exporters more competitive and boosting their latest earnings results.

Abe has heaped pressure on the central bank, threatening to change the law guaranteeing its independence if it did not fall into line.

Late last month he nominated Asian Development Bank head Haruhiko Kuroda to take the helm at the Bank of Japan, after Masaaki Shirakawa stepped down early following repeated policy clashes with the premier.

Abe also unveiled a massive spending plan in January that he says will boost flagging GDP by two percentage points and create 600,000 jobs.

Hideki Matsumura, economist at Japan Research Institute, said the GDP figure Friday "confirmed that the Japanese economy has hit bottom and started picking up".

"Thanks to measures introduced by the Abe administration, Japan is likely to show stronger recovery from now. Nearly all factors are pointing to the positive," he said.

Yasuo Yamamoto, senior economist at Mizuho Research Institute, said the numbers "show that the bottom of the latest recession was probably in November".

"Looking at the latest trade data, I would say recovery in exports will still be slow in the January-March quarter, so GDP growth in the same quarter would be also modest," he said.

"The question is when the effects from public spending in the government's stimulus package will appear, and I think it will be probably in the April-June quarter," he said.

Together with a positive impact from a weak yen, which should visibly boost demand for Japanese exports from around July, "Japan will be able to achieve a real GDP growth of two percent for fiscal 2013" starting April, Yamamoto said.

Japan logged its worst ever monthly trade deficit of 1.63 trillion yen ($17 billion) in January despite an upturn in exports, as the yen's recent sharp drop pushed fuel costs higher, finance ministry data showed last month.

And the latest ministry data on Friday showed Japan posted a trade deficit of 935.79 billion yen ($9.87 billion) in the first 20 days of February, the gap more than 12 times a 74.49 billion yen deficit in the same period the previous year.

Source: AFP