Leading article: Japan's hazy sunrise

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Of all the countries expected to lead the world out of recovery, Japan has always been the least likely. Ever since the global economy turned downwards a year ago, Japan has been presented as the object lesson of where not to be –, a high-savings country with little domestic impetus to growth, with soaring government debt and an ageing population. There but for the grace of good economic management and heavy doses of government spending, came the cry from No 10, could Britain be.

As it turns out, Japan, like Germany (another example held up in London as what not to do), has managed a second quarter of visible, if not fantastic, growth. At a rise of 0.9 per cent, compared to the more paltry 0.3 per cent recorded by both France and Germany, the decline of 1% in Amnerica and the further fall of 0.8 in the UK economy in the period April to June, Japan experienced its first period of growth after a year of drmatic fall and a long-term stagnation lasing nearly two decades.

For a beleaguered Tokyo government facing elections this month, this is good news even if it is unlikely to save it from defeat. If only Gordon Brown could hope for as much. But as an indicator of a revival in world trade, it remains much more uncertain. Just as in China and the US, as well as the UK, almost all the economic revival, such as there is, has been driven by massive public spending. There is little sign that the Japanese consumer is moving from saving to consumption in a way that could sustain private investment and imports, and hence aid regional or global recovery. Given the degree of government debt, the state cannot go on spending like this for ever. Yet, such is the deflationary mindset among the Japanese, it is difficult to know quite what replaces it.

The same dilemma faces us in Britain. We may hope that the economy is more flexible than Japan's. The fall in output here has certainly been far less precipitous than in Japan or Germany. But any buoyancy we have has been sustained almost entirely from the public sector. How long can this go on and how far the Government can hope for other economies to pull us out of recession are questions still to be resolved. Japan offers hope but not an answer.

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