After two years, Japan's economy is growing again

Japan's GDP rose at an annual rate of 4.8% in the quarter ending Sept. 30. Most analysts had forecast a figure below 3%. It is not entirely clear how much of the increase is due to government stimulus and how much is due to "organic" activity including consumer spending and exports. Capital spending did rise 1.6%. Consumer activity was up a tiny 0.7%, but most experts believe that this was due to incentive programs to get people to buy cars and appliances.

The Japanese numbers, while good, point to the dilemma of the all the wealthy nations including the U.S., U.K. and many E.U. countries. GDP started to improve in the third quarter for most of these countries, but almost all of that activity was due to stimulus programs, which in turn have caused sovereign treasuries to take on hundreds of billions of dollars in new debt. Debt service is becoming a larger and larger part of most national budgets, and unless GDP growth rebounds quickly and dramatically, higher taxes will be the only way to dig these economies out of a hole.