Japan's economy grew 0.6 per cent over previous quarter

Nov 13, 2007, 10:14 GMT

Tokyo - Japan's economy grew 0.6 per cent in the third quarter from July to September over the previous quarter, thanks to increasing exports and consumer purchases, the Japanese government said Tuesday.

The figure prompted projections that Japan's economy would grow 2.6 per cent for the year - higher than the 1.8 per cent that had been anticipated by economists, after the giant economy shed at a 1.6-per-cent annualized rate in the second quarter.

Consumers drive 55 per cent of the Japanese economy, and consumption grew by an unexpected 0.3 per cent in the second quarter, while exports were up 2.9 per cent.

Despite the positive economic news, Japan's central bank maintained its key short-term interest rate unchanged at 0.5 per cent at the end of a two-day meeting Tuesday.

Investments in home construction fell by 7.8 per cent after a change in the laws - the largest drop in 10 years.

In addition, investors are worrying about the risks of an economic downswing in the United States, Japan's largest export market.

Japan's economic minister Hiroko Ota confirmed the nation's economy 'remains on a steady recovery path, supported by firm external and domestic demand, except for a fall in housing investment.'

But she pointed out that lingering concerns over the US subprime mortgage crisis and rising oil prices may affect Japanese financial markets and smaller businesses.