Japan’s economy grew for the first time in five quarters as a revival in exports and consumer spending helped the country climb out of its worst postwar recession.

Gross domestic product expanded at an annual 3.7% pace in the three months ended June 30, following an 11.7% decline in the previous quarter. From the previous quarter, the world’s second largest economy grew by 0.9%.

Consumer spending, which accounts for more than half of the economy, rose 0.8%, adding 0.5 percentage point to the expansion.

Exports led the expansion, jumping 6.3% from the previous three months. Net exports, or overseas shipments minus imports, contributed 1.6% points to QoQ growth.

Japan’s recovery hinges largely on its overseas markets, which are showing signs of stabilizing. A report last week showed the euro area contracted 0.1% last quarter, the region’s best performance in more than a year. The US shrank at an annualized rate of 1%, the least in a year. China, Japan’s top overseas market, grew 7.9% from a year ago.

However, the recovery may not be sustained once the USD 2 trillion in worldwide stimulus that propped up sales for exporters from Toyota Motor Corp to Kubota Corp runs out. Some 40%t of factories still sit idle, forcing companies to cut costs staving off unemployment that’s approaching a record high.

Mr Seiji Shiraishi chief economist at HSBC Securities Japan Ltd in Tokyo said that “The growth we’re seeing is based on government spending and a rebound from the very low level in the previous quarter. Companies are burdened with huge overcapacity in terms of equipment and people. It’s much worse than in previous recoveries.”

(Sourced from Bloomberg)