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.

A crane car­ries a con­tainer at the Oi con­tainer yard of Tokyo port. An­a­lysts have mixed views on whether Ja­pan’s strong per­for­mance will con­tinue.

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