Robust Japanese growth defies expectations

12 Aug 19

Japan’s economy has been growing faster than expected despite slowing global demand because of trade tensions. 

Buoyed by household consumption and business investment, the Japanese economy grew by an annualised 1.8% in the second quarter of this year, according to government data.

Although growth is slowing, it is the third consecutive quarter of expansion and eases pressure on the Bank of Japan to follow the lead of other central banks by taking measures to stimulate the economy.

Preliminary figures released by the country’s cabinet office said inflation-adjusted GDP in the world’s third-largest economy expanded at an annualised 1.8% in real terms between April and June.

This exceeded market forecasts of between 0.4% and 0.7% and comes after revised 2.8% growth in the January–March period.

“The result showed Japan’s economy continues to moderately recover, centred on domestic demand,” economic and fiscal policy minister Toshimitsu Motegi told reporters.

Japan’s resilience is underpinned by sectors that have been less affected by slowing global trade and the data suggest that domestic demand was responsible for 0.7% of the GDP growth.

Exports have been in decline, and fell 0.1% in the April–June period, failing to recover from a 2% slump in the previous quarter.

Rising private consumption – which accounts for about 60% of Japan’s economic activity – is attributed in large part to demand for cars, and capital expenditure has also been robust.

Tourism and a boost to the economy in the run up to the 2020 Tokyo Olympic Games has driven the construction of hotels and leisure facilities. 

However, economists believe Japan’s economy will find it hard to avoid the challenges posed by escalating trade tensions between the United States and China and recent appreciation in the yen against major currencies, which has eroded competitiveness.

Analysts also warn that domestic demand could lose momentum after October when Japan plans to hike a sales tax to 10%, with some economists fearing this could knock the economy into contraction. Data suggest consumer confidence is already faltering.

According to The Japan Times, Motegi warned that attention should be paid to global risks, including a slowdown in the Chinese economy and financial market fluctuations.

In that event, the minister added that the government would “take countermeasures without hesitation”.

  • Gavin O'Toole, expert on Latin America
    Gavin O'Toole

    A freelance journalist. He has written six books about Latin America and taught the politics of the region at Queen Mary, University of London.

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