Japan’s economy stages modest bounce from COVID jolt, global outlook darkens
11:13 JST, August 15, 2022
TOKYO (Reuters) – Japan’s economy rebounded at a slower-than-expected pace in the second quarter from a COVID-induced slump, data showed on Monday, highlighting uncertainty on whether consumption will grow enough to bolster a much-delayed, fragile recovery.
While rising consumption propped up April-June growth, the outlook has been clouded by a resurgence in infections, slowing global growth, supply constraints and rising raw material prices that are boosting households’ living costs.
“Consumption and capital expenditure will continue to drive growth in July-September. But momentum may not be that strong as rising inflation is cooling household spending,” said Atsushi Takeda, chief economist at Itochu Economic Research Institute.
“While domestic demand may continue to expand, falling exports could put a brake on Japan’s recovery,” he said.
The world’s third-largest economy expanded an annualized 2.2% in April-June, government data showed, marking the third straight quarter of increase but falling short of median market forecasts for a 2.5% gain. It followed a revised 0.1% rise in gross domestic product (GDP) in January-March, when surging COVID cases hurt spending.
The growth was driven largely by a 1.1% gain in private consumption, the data showed, as businesses re-opened after the lifting of pandemic-related curbs on economic activity.
The rise in consumption, however, was smaller than market forecasts for a 1.3% increase. Wage earners’ remuneration during April-June, adjusted by inflation, fell 0.9% from the previous quarter, a deeper drop than a 0.1% fall in January-March in a sign rising living costs were hurting household income.
Capital expenditure, another key driver of April-June growth, increased 1.4% from the previous quarter, exceeding a median market forecast for a 0.9% expansion, the data showed.
Domestic demand added 0.5% point to GDP growth, while external demand neither added to, nor shaved off from growth.
Japan has lagged other major economies in fully recovering from the pandemic’s hit due to weak consumption, blamed in part on curbs on activity that lasted until March.
That has turned the Bank of Japan (BOJ) into an outlier in the global monetary tightening phase sweeping across many economies amid surging inflation.
Policymakers hope pent-up demand will underpin consumption until wages rise enough to make up for increasing living costs. But there is uncertainty on whether companies will hike salaries amid heightening risks of slowing global demand, analysts say.
The BOJ has stressed its resolve to maintain ultra-loose monetary policy even as inflation exceeded its 2% target for three straight months in June, to ensure the economy makes a sustained recovery driven by solid consumption and wage growth.
"NEWS SERVICES" POPULAR ARTICLE
Japanese Actor-Director Kitano Says His New Film Explores Homosexual Relations in the Samurai World
Japan’s Nintendo Profits Jump as Its Game Sales Get a Boost from the Hit Super Mario Movie
Japan’s Nikkei Pares Early Gains as Investors Lock in Profits
Israel Searches for Traces of Hamas in Raid of Key Gaza Hospital Packed with Patients
Japan’s Nikkei Inches Down as Automakers Skid on Yen Strength
JN ACCESS RANKING
- Japan, Vietnam Trade Ministers Discuss Supply Chains, IPEF
- BOJ Ueda: Japan Increasingly Likely to Hit Inflation Target
- Stimulus Package Set to Drive Greater Govt Borrowing; Likely Effectiveness Called into Question
- AI-generated Child Porn Floods Japan-based Website (Update 1)