TOKYO — Japan’s economy grew at an annual rate of 2. 2 percent in the April-June quarter, the government said Monday, as customer spending recovered as pandemic precautions were lifted.
After keeping its borders closed to the maximum number of travelers during the pandemic, Japan has slowly begun to reopen to tourism, while activity has returned more or less to normal following the easing of various voluntary restrictions.
These families are venturing out and spending more, even as coronavirus infection rates have skyrocketed with the spread of the omicron variant of COVID-19.
A revised estimate estimated that expansion in the world’s third-largest economy would be strong in the first quarter of the year, to date with an earlier reading of a 0. 5 percent contraction. Last quarter’s reading was lower than expected for the 2. 5% annual expansion. In quarterly terms, the economy grew 0. 5%, outperforming its pre-pandemic duration but weaker than analysts expected.
“However, it suggests that the suppressed call for COVID-19 reopening may continue to grow in the long run,” IG’s Jun Rong Yeap said in a comment.
Private entry jumped at an annual rate of 4. 6%, but appears to be constrained by rising prices.
After decades of battling deflation or weakening costs and wages, rising global costs of energy and other uncooked fabrics are taking a toll on Japan’s wallets and balance sheets. Japan imports almost all of its oil, fuel and coal as food and commercial parts used in manufacturing.
The inflation rate remains low. The Bank of Japan’s most recent estimate for the fiscal year to March 2023 is customer inflation of 2. 3%, well below the latest four-decade high of 8-9% in the US. who now show symptoms of relaxation.
But the Japanese yen also weakened, to its lowest point in two decades against the dollar, making imports more expensive. On Monday, the dollar was trading at around 133 yen. It recently jumped to almost 140 yen.
Experts highlight the dramatic increase in COVID-19 cases in recent weeks to record highs in increased test availability, more transmissible variants, and many Japanese with insufficient vaccines, even when injections are readily available.
This added to uncertainty about the outlook. Some analysts say Japan’s economic expansion will slow down during the July-September period.
“After a much brighter spring, the economy will slow this quarter due to declining customer spending due to emerging COVID-19 infections,” Takayuki Toji, an economist at SuMi TRUST, said in a report.
It all depends on what happens elsewhere, especially in China, a massive source of demand for Japanese exports. Efforts by Chinese authorities to eliminate COVID-19 by closing entire businesses, neighborhoods, and cities have slowed expansion and caused production disruptions across the region.
“Exports are expected to be supported by the lifting of the urban blockade in China and capital investment is expected to take hold, but the slowdown in global expansion due to financial constraints in the United States and Europe will wreak havoc,” Toji said.
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