Revised Data Reveals Higher-than-Expected Growth in Japan’s Economy
Revised data shows that Japan’s economy expanded more than initially estimated in January-March, driven by a post-pandemic increase in domestic spending and company restocking, which helped offset the impact of slowing global demand on exports.
Wage Hikes Critical for Sustained Growth in Japan
The sustained growth of Japan’s economy, the world’s third-largest, is now dependent on the crucial element of ensuring ongoing wage increases due to the unprecedented level of inflation experienced in the country over the past forty years. This objective is considered a core policy focus by both the Bank of Japan and the government.
Recognizing the importance of boosting wages, these entities aim to stimulate consumer spending and foster economic stability in the face of rising inflationary pressures.
Strong GDP Growth Driven by Private Consumption and Inventory Revisions
During the January-March period, Japan witnessed a substantial expansion in its gross domestic product (GDP) with a remarkable annualized growth rate of 2.7%. This exceeded the initial estimates and surpassed the expectations put forth by economists.
This growth was largely driven by strong private consumption. However, some concerns have been raised regarding the reliance on inventories as a contributing factor to this growth.
Reversing the Technical Recession and Revised Growth Figures
Revised data not only shows the stronger January-March growth but also eliminates the technical recession reported in the second half of the previous year. GDP in October-December rose 0.4%, following a contraction of 1.5% in July-September.
Capital Expenditure and Stronger Work-in-Progress Inventories Drive Growth
An official explained that the upward revision in GDP was attributed to faster growth in capital expenditure, particularly among automakers and semiconductor equipment firms. Work-in-progress inventories played a significant role as well.
Domestic Demand Contributes to Growth, Net Exports Weigh on GDP
While domestic demand contributed more than initially estimated to the first-quarter GDP growth, net exports had a negative impact. Weaker export growth, especially in electronic parts, was offset by improved car exports due to eased supply bottlenecks.