Japan's economy expands 1.6% on consumption, tourism
Japan's economy grew an annualised real 1.6 per cent in January-march, the first expansion in three quarters, aided by strong private consumption and an inbound tourism recovery in a fresh sign the impact of the COVID-19 pandemic is waning, the government said yesterday.
Despite the stronger-than-expected reading for gross domestic product, the total value of goods and services produced in a country, the data showed exports plunged and the economy fell into a technical recession of two consecutive quarters of negative growth late last year.
Real GDP, adjusted for inflation, increased 0.4 per cent from the October-december quarter. In fiscal 2022, the world's third-largest economy expanded 1.2 per cent in real terms, marking the second straight year of growth.
The result beat the average market forecast of an annualised 1.1 per cent expansion for January-march expected by economists in a Japan Centre for Economic Research survey.
"The good news is the economy was technically in a recession last year but rebounded in January-march. The return of inbound tourism is expected to support the economy even when we expect slowing growth in exports to the US and Europe," said Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute.
Real GDP was down 0.01 per cent in October-december, following a 0.2 per cent contraction in the previous quarter.
"Rising prices have had a negative impact on consumers. The hope
Rising prices have had a negative impact on consumers. The hope is that wages will rise this year and inflation will also start decelerating, which will support private consumption."
Yuichi Kodama, chief economist at the Meiji Yasuda Research Institute
is that wages will rise this year and inflation will also start decelerating, which will support private consumption," Kodama added.
Private consumption gained 0.6 per cent as demand for cars and durable goods was strong and consumers ramped up spending on services such as dining out. It was the fourth straight quarterly gain.
Capital spending increased 0.9 per cent, helped by increased car-related investments, marking the first gain in two quarters.
Still, exports marked the sharpest fall in about three years, clouding the outlook for the economy amid aggressive interest rate hikes in the US and Europe where central banks are seeking to curb demand to fight soaring inflation.
Exports dropped 4.2 per cent, hurt by slumping shipments of cars and machinery to produce chips, while imports fell 2.3 per cent. Public investment was almost flat.
The government has been reducing utility bills for households but inflation has remained well above the Bank of Japan (BOJ)'S 2 per cent target for a full year.
The Japanese central bank is in no hurry to raise interest rates, though, bucking the global trend of monetary policy tightening. The BOJ argues most price gains can be attributed to rising import costs, not stronger demand.
With the best outcome in about three decades of the "shunto" annual wage negotiations between labor unions and management expected for the current fiscal year, both Prime Minister Fumio Kishida and
BOJ Governor Kazuo Ueda are keeping tabs on whether the momentum will be sustained.
Nominal GDP increased 1.7 per cent, or at an annual rate of 7.1 per cent, the largest gain since the July-september quarter of 2020.