Japanese Economy Rebounds in 2Q

TOKYO (TheStreet) -- Japan's economy grew at an annualized rate of 3.7% in the second quarter, the Japanese government reported today. And depending upon whether you're a sake-glass-half-full or sake-glass-half-empty type, this is either news that the world economy is recovering from the international recession -- or it's an economic chimera buoyed by one-time stimulus measures.

According to the Japanese government, the April-June recovery was driven by a robust demand for exports such as video recorders and other electronics goods. Shipments to China and other emerging markets were particularly strong. Exports grew 6.3 percent from the previous quarter, the highest growth since the second quarter of 2002.

Government stimuli -- such as cash handouts and incentives to buy ecological products -- also helped bolster the domestic economy.

Regardless, Japan's domestic demand remains weak. The nation's unemployment rate has risen to a six-year high of 5.4 percent as companies such as Toyota Motor(TM Quote) and Sony(SNE Quote) have laid off thousands of workers. During the second quarter, employee compensation also fell by 1.7 percent.

Japanese private capital investment slid 4.3 percent from the previous quarter, while housing investment plunged 9.5 percent, the government said.

"When you look at the numbers, the contrast between external demand and internal demand is as clear as night and day," said Hiroshi Watanabe, economist with Daiwa Institute of Research in Tokyo. "With payments falling, it's really hard to expect individual spending to hold up."

The rebound in the world's second-largest economy came after a yearlong contraction in gross domestic product. The final quarter of 2008 was particularly horrific, with the Japanese economy shrinking at a 13.1% pace.