Japan’s economy grew at an annual pace of 1.6 percent in the quarter through March as private demand rebounded after COVID-19 restrictions were eased, data released yesterday showed.
Real GDP, which measures the sum value of a nation’s products and services, grew 0.4 percent quarterly in the January-to-March period in the world’s third-largest economy, the Japanese Cabinet Office said.
That was the fastest pace of GDP growth since the 1.1 percent growth in the April-to-June period last year. It was also better than the market consensus forecast of 0.2 percent.
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Japan’s benchmark Nikkei 225 gained 0.8 percent to finish at 30,093.59 on the news of solid economic growth data.
The annualized pace shows what the growth would have been if what was marked during the quarter had continued for a year.
The biggest contributor to growth was private demand, surging an annual 3.1 percent, with consumer spending and private investment showing a healthy rebound. The recent opening of borders to tourists and other incoming travel has also helped consumption perk up.
Public demand grew at an annualized 1.8 percent.
“Japan’s economy appears to be on a gradual recovery track despite sluggish global demand,” ING Groep NV chief Asia Pacific economist Rob Carnell said
Some analysts think such signs of recovery will prompt Japan’s central bank to take action on a policy change and move toward higher interest rates.
The Bank of Japan policy board meets next month.
On the negative side, slowing exports dragged on growth, reflecting lagging global economies. Japan’s exports in the January-to-March period dropped an annualized 15.6 percent.
While much of the world, including Europe and the US, has been focused on inflationary pressures, Japan has been more cautious about its approach to inflation, because it has been hit by decades of the opposite problem: deflation, when prices spiral down.
Electricity bills were recently raised across the nation. Although that does not directly affect core inflation, the move is likely to have a trickle-down effect and boost inflation, analysts say.
The relatively positive read for the Japanese economy could even work toward supporting Japanese Prime Minister Fumio Kishida’s standing with the public, which has had its ups and downs. Speculation is simmering that Kishida might call a snap parliamentary election later this year.
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