Japan’s economy returns to growth, but can it last?

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Japan emerged from recession in the second quarter, the government reported Monday. But the economy’s growth was slightly below expectations, and investors have turned wary after the Tokyo stock market hit a 10-month high on Friday.

Germany and France also reported last week that their economies resumed growth in the second quarter. The data raised hopes that the global recession has run its course.

But the sustainability of any rebound remains highly suspect, for reasons including the renewed slide in the confidence of U.S. consumers -- the intended buyers for much of the world’s exports.

From Bloomberg News:

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, the Cabinet Office said. The median estimate of 22 analysts surveyed by Bloomberg News was for 3.9% growth.

The recovery may not be sustained once the $2 trillion in worldwide stimulus that propped up sales for exporters from Toyota Motor Corp. to Kubota Corp. runs out. Some 40% of factories still sit idle, forcing companies to cut costs and leaving the winner of an Aug. 30 election with the challenge of staving off unemployment that’s approaching a record high.

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

The Nikkei-225 stock index was down 235 points, or 2.2%, to 10,361 in early trading Monday. The index hit 10,597 on Friday, its highest since Oct. 6.

Through Friday the Nikkei’s year-to-date gain was 19.6% compared with an 11.2% rise for the U.S. Standard & Poor’s 500 index.

-- Tom Petruno