August 15, 2022

Data for April-June indicated Monday that Japan’s economy grew for the third consecutive quarter on the strength of strong private consumption, a sign the nation was finally staging a long-delayed comeback from a Covid-induced depression.

The rise of Covid-19 infections, sluggish global development, supply issues, and rising raw material prices that are increasing household living expenses, however, make the situation dubious.

The third-largest economy in the world saw its gross domestic product (GDP) grow by an annualized 2.2% in the second quarter, accelerating from a revised 0.1% gain in January-March, according to government figures. It was less than the 2.5% growth that the market had on average predicted.

According to the report, the gain was mostly driven by a 1.1% increase in private spending, which makes up more than half of Japan’s GDP. However, the gain fell short of market expectations for a 1.3% increase.

The statistics showed that capital expenditure rose 1.4%, exceeding the median market expectation of 0.9% growth.

Contrary to expectations for a 0.1 percent contribution, external demand neither increased nor decreased GDP growth.

Due in part to activity restraints that lasted until March, Japan has lagged behind other major economies in fully recovering from the pandemic’s damage.

Due to the global monetary tightening phase that is sweeping through many economies amid rising inflation, the Bank of Japan has become an outlier as a result.

Policymakers anticipate that pent-up demand will support consumption until salaries increase significantly enough to offset rising living expenses. However, analysts believe there is uncertainty over whether businesses will raise wages given the growing dangers of a deteriorating global economy.

Source: CNBC
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