Japan emerges from recession -- or does it?

Beleaguered Japan should be celebrating today on the news that it has become the latest major economy to emerge from recession. Today the yen reached a two-week high of 94.52 and the country is reporting economic growth of 0.9 percent in April-June following a downturn of 3.1 percent during the previous quarter and 3.5 percent during the October-December period. It's the first time that the world's second largest economy has reported any growth in five quarters.

Even so, the Nikkei fell 3.1 percent to 10,268.61 – it's largest drop in four months - with Nintendo losing 2.6 percent after Credit Suisse lowered its rating on the electronic gaming company.

Investors and analysts worry that this growth is unsustainable as it is largely due to a number of huge government led incentives and eco-friendly stimuli like cash for clunkers and even cash hand-outs amounting to an average of 12,000 yen ($127 at today's exchange rate) per person or two trillion yen ($22 billion) total in one-off payments. The country is suffering from record-high unemployment, thanks to all-around cost cutting by major employers like Nikon and NEC Electronics.

Despite slashing costs, Nikon is forecasting a record 28 billion yen ($300 million) annual loss and planning to drop another 1,000 employees from its payrolls, while NEC says it is poised to endure a fifth year of losses and will be cutting another 1,200 jobs by March 31. With advertisements for jobs frequently specifying, "35 year old males only should apply," it's not clear that the scores of Japan's unemployed will find work any time soon.

None of this is good news for a country that is heavily dependent on private consumption. "The outlook remains severe, but we expect the economy to head toward a recovery," said Economic and Fiscal Policy Minister Yoshimasa Hayashi. "We have to pay full attention to risks including production levels, a worsening job market and downside risks for the global economy."

So don't crack open the champagne yet: Having endured a number of false starts during the country's "lost decade" in the 1990s, the Japanese have reason to worry that this could just be another false dawn in the land of the rising sun.

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