Japan’s economy has shown resilience by growing for a second consecutive quarter, driven primarily by robust consumer spending. Recent reports indicate that the country’s GDP expanded by an annualized rate of 0.9% in the July-September period, following a 0.5% growth in the previous quarter from April to June. This marks a significant turnaround after a contraction of 0.6% in the first quarter of 2024.
Japan’s economy grew at an annualized 0.9% in the July-September period as consumer spending held back, government data showed on Friday.
The world’s fourth-largest economy grew 0.2% in the fiscal second quarter, marking the second straight quarter of expansion following 0.5% growth in April-June.
Seasonally adjusted gross domestic product, or GDP, measures the value of a nation’s products and services. The annual rate shows how much the economy would have grown or contracted if the quarterly rate had continued for a year.
Domestic demand grew at an annual rate of 2.5%. Private consumption, which accounts for more than half of Japan’s GDP, rose 3.6% on the back of healthy household consumption, according to preliminary data from the Cabinet Office.
Recent data shows that wages and employment are improving. Costs were lower than in the previous quarter, partially due to severe weather that reduced costs and some factory shutdowns. Recent income tax cuts have helped boost spending.
Exports increased by 1.5%. A weaker yen is a plus for exports, which tends to make Japanese products cheaper overseas. But the impact was relatively limited in recent quarters. The Japanese yen was trading at the 160-yen level earlier this year. It is now trading at the 150-yen level.
Two quarters ago, the economy contracted 0.6% in the January-March quarter after growing 0.1% in October-December in 2023, showing how Japan’s economy recently slipped into a period of contraction amid weak expansion.
“We believe the Japanese economy will continue to grow slowly, which supports growth in overseas economies,” said Katsutoshi Inado, senior strategist at SuMi Trust.
He noted that many Japanese receive winter bonuses in the coming months that will help strengthen domestic demand.
As for headwinds, Japan faces political uncertainty as Prime Minister Shigeru Ishiba must survive a runoff to stay in office this week but now faces a spirited opposition.
Unlike the US and other developed nations grappling with inflationary pressures, Japan was struggling with years of deflation, or the steady decline in prices that underscored a fragile economy. Inflation was 2.5% in September.
Market watchers are also focused on when the central bank may move on interest rates. The Bank of Japan kept interest rates at zero or below zero for years to pull the economy out of deflation but is gradually raising them.