Resurgent car exports propelled Japan’s economy to a larger than expected expansion in the second quarter of the year, offsetting immediate concerns that the country was vulnerable to global recession.
Japan’s gross domestic product grew at an annualised rate of 6 per cent during the April-June period, significantly higher than the 2.9 per cent consensus estimate of economists and the third straight quarter of expansion.
Analysts said the weak yen, which remains close to multi-decade lows, had been a boon to the nation’s exporters even as it hit domestic consumption by contributing to higher prices for imports.
But while the 1.5 per cent quarter-on-quarter gain in Japan’s GDP was much bigger than the 0.8 per cent average forecast by economists, several cautioned that a recovery of post-pandemic domestic consumption remained unconvincing.
Exports expanded by 3.2 per cent in the second quarter. Car sales abroad were helped by the fading impact of supply chain disruption, while inbound tourism, whose contribution to GDP is included in net export figures, has returned to more than two-thirds of pre-pandemic levels. Foreign arrivals are expected to continue to grow after China last week ended restrictions on group tours to a number of countries including Japan.
However private consumption — which makes up more than half of the Japanese economy — fell 0.5 per cent quarter on quarter.
Marcel Thieliant, an economist at Capital Economics, noted the 4.3 per cent quarter-on-quarter fall in imports — one of the largest on record and a potential signal of the impact that rising prices are having on consumers in Asia’s second-biggest economy.
After decades of stagnant or falling prices and flat wage growth, Japanese consumers have faced significant increases in the prices of food, goods and some services over the past 20 months.
The weak yen has accentuated the pain of energy and other imported commodity price increases and damped Japan’s bounceback from lower spending during the pandemic.
Stefan Angrick, a senior economist at Moody’s Analytics, said despite the strong reading from the GDP numbers, it would be premature to say the Japanese economy was out of the woods. “Looking beyond headline GDP, it’s not all sunshine and rainbows,” he said.
“Domestic demand lacks oomph. High inflation has kept households and businesses reluctant to spend, raising the question whether Japan’s post-pandemic recovery has run out of steam before properly getting going.”
Source: Economy - ft.com
