As Japan’s Economy Grows, Expectations Are Shattered

(CTN News) – There was a big surprise in Japan’s quarterly growth data on Tuesday as car exports rebounded and tourists flocked back, but economists cautioned that these were temporary effects.

According to preliminary government data, the third-largest economy in the world expanded 1.5 percent quarter-on-quarter in the three months to June, marking the fastest growth rate since the fourth quarter of 2020.

According to Bloomberg News, this growth was almost twice as high as the average economist prediction of 0.8 percent, and a revised growth rate of 0.9 percent was reported in the previous quarter.

In terms of an annualised rate of growth, the country registered 6.0 percent, which is more than double what was expected by the market of 2.9 percent.

Japan now has three consecutive quarters of growth.

As a result of the easing supply crisis for the auto sector, and the yen’s depreciation providing assistance to the auto sector, Japan’s exports have recovered,” Ryutaro Kono, chief economist at BNP Paribas, wrote in a note before the data was released.

According to Hiroyuki Ueno, chairman of SuMi TRUST, the economy was boosted by a combination of pent-up demand from the pandemic and an increase in capital investment.

Ueno wrote ahead of the release of the report that, as the pandemic has now passed, the hospitality sector is predicted to continue to be a driver of economic growth due to an increase in inbound tourism.

While the number of inbound visitors to Japan has not yet returned to pre-pandemic levels, he wrote that the amount of food consumed by tourists while in Japan has increased, partly because of the weak yen and partly due to the decline in the number of travelers.

In his speech last month, the chief economist of the International Monetary Fund declared that Japan was “one of the few advanced economies that is expected to perform better in 2023 than in 2022.”

It is expected that the current fiscal year, which runs from January 1 through March 31 of next year, will bring growth of 1.3 percent.

It is worth noting that the good news from Japan follows well-received data from several other major economies, such as the United States, although China remains a major concern.

The data, however, also underscored, according to economists, that domestic demand continues to remain weak, due to the rising cost of living for Japanese families.

Capital Economics’ Marcel Thieliant said that real household disposable income was down by 4.5 percent year-on-year in the third quarter, and that it would continue to fall until the second half of next year as well.

As a result of the supply shortages diminishing, exports as a whole grew 3.2 percent in the last quarter as compared with the previous quarter, mostly due to a “huge” 14 percent jump in car shipments.

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