Japan’s economy expands 0.6% in Q2
Longest growth period in decade, boosted by surging exports, Tokyo 2020 Olympics investments
Japan’s economy grew 0.6% in the second quarter, marking the longest period of expansion in more than a decade for the world’s third-largest economy.
The latest figure, out yesterday, was revised down from an initial estimate of 1% but was still a strong performance from the Asian powerhouse economy, analysts said.
Japan’s economy has been picking up steam, mainly on the back of surging exports including smartphone parts and memory chips, with investments linked to the Tokyo 2020 Olympics also giving growth a boost.
Yoshiki Shinke, chief economist at Daiichi Life Research Institute, said strong growth was likely to continue, although concerns over North Korea would linger.
“Looking ahead — of course we have the North Korean issue which is hard to predict — but otherwise no urgent worries or risks so the economy will likely continue picking up,” he said.
Marcel Thieliant from Capital Economic said there were “early indications” pointing to a possible slowdown in the third quarter. “But the bigger picture is that the economy is experiencing one of the longest recoveries in recent history.”
On a year-on-year basis, the economy grew by 2.5%, driven by robust domestic demand and corporate investment, which offset a quarterly decline in exports. The annualised growth rate was especially impressive given that Japan’s potential growth is said to be around 1% or less, Shinke noted.
But corporate investment was much weaker than the preliminary figures, with the latest data showing 0.5% growth, compared with a 2.4% preliminary figure.
Japan’s labour market is tight and business confidence is high but efforts to lift inflation have largely fallen flat despite years of aggressive monetary easing by the Bank of Japan.
The latest reading nonetheless means the economy has had six consecutive quarters of growth — its best string of gains since the tenure of popular former prime minister Junichiro Koizumi.
Friday’s numbers are also upbeat news for current prime minister Shinzo Abe — whose brief and underwhelming first term as Japan’s premier came directly after Koizumi.
A string of short-term leaders followed Abe’s first term before he swept back to power in late 2012 on a pledge to reignite the once-booming economy with a plan dubbed Abenomics.
The scheme — a mix of huge monetary easing, government spending and reforms to the economy — stoked a stock market rally and fattened corporate profits.
But some critics have cast doubt on the plan, as heavily indebted Japan grapples with low birth rates and a shrinking labour force.
Friday’s data showed private consumption, which accounts for more than half of GDP, picked up 0.8% in the second quarter, compared with a 0.9% rise in the preliminary estimate.
However, Takashi Miwa, chief Japan economist at Nomura Securities, cautioned that growth in the second quarter was bolstered by private consumption, which he said was “not sustainable”.
The yen has been strengthening partly due to its status as a safe-haven currency amid the North Korea crisis and this could weigh on exporters in the future, he said.