GDP Growth In Japan Exceeds Expectations

Interest rates remain low, and inflation is under control. Exports are driving the development of the Japanese economy, which recorded an annualized growth of 6% in the second quarter of 2023. But some economists advise caution in evaluating official data.

Compared to the economic woes of the United States, Europe, and the G-7 that are striving to generate economic growth, Japan in 2023 presents an economy in perfect or near-perfect health. According to the latest figures from Statistics Bureau of Japan (SBJ), in the second quarter of 2023, gross domestic product increased by a staggering 6% year-on-year, which is well above the growth forecast of 2.4-3.1%. Compared with the results for the first three months of the year, the economy of the Land of the Rising Sun showed an increase of 1.5% in the April-June period. This is well above the forecast by the Trading Economics agency, which, after polling some reputable Japanese economic operators, suggested a modest +0.8% in the second quarter of 2023.

While international rating agencies Fitch and Moody’s predict a recession for the US economy between the end of 2023 and the first quarter of 2024, Tokyo government sources highlight the fact that “this was the best-performing quarter for the Japanese economy since 2020.” Part of the surge in GDP was attributed to a “farewell” to the Covid restrictions that were completely lifted in 2022, thus opening the way for an inflow of tourists from all over the world and an increase in exports. Indeed, demand for “Made in Japan” goods rose 3.2% in the second quarter. However, it should be noted that export growth was mainly due to car sales abroad. And this happened despite the fact that Japan, as part of its sanctions policy, banned the export of cars with the engine capacity over 1.9 liters to Russia, one of the largest automotive markets in the world.

But, as the saying goes, “a fly in the ointment” can ruin everything: the slowdown in consumer spending is putting pressure on growth, which recorded a 0.5% drop in the second quarter compared to the results of the first three months of the year.

Takumi Tsunoda, senior economist of the Sinkin Central Bank Research Institute, in an interview with the Internet portal, presented a “much more sober” picture of the Japanese economy. “The most important factor was the fall in imports, which boosted GDP growth,” said Tsunoda, according to whom the triumphant data “by no means indicates a strong recovery in the Japanese economy.”