Japan has recorded its longest run of sustained economic growth in more than a decade as stronger global demand especially for tech products and an improvement in household spending helped drag the economy higher for yet another quarter in the three months to March 31.
Data out yesterday showed GDP rose at an annual rate of 2.2% in the three months to March, according to the country’s Cabinet Office, marking five quarters of continuous output growth.
The pick up in growth was driven by consumption and exports, highlighting how the weaker yen since the election of Donald Trump as US president last November has helped steady Japan’s economy, especially the trade account.
For Australia is is very good news because Japan is our second biggest export market, especially for commodities and increasingly, services.
Net exports contributed 0.6 percentage points to growth while consumption contributed 0.8 percentage points (imports detracted 0.2 percentage points from growth).
Consumption has been a persistent weakness for Japan in recent years (especially after the two big rises in the country’s sales tax) and the pick-up will encourage the Bank of Japan and the government that the highly stimulatory policies since 2013-14 are at last starting to have a sustained impact.
Analysts say the sustained growth – the best since 2006 – points to a Japanese economy that has regained its momentum after the consumption tax rise of 2014 and an emerging market slowdown in 2015.
The data will give renewed hope to the Bank of Japan of eventually hitting its 2% inflation target and boost the government of Prime Minister Shinzo Abe who has followed up the central bank’s record low (negative) interest rates and huge bond buying program with a big fiscal loosening of his own.
The preliminary estimate from the Cabinet Office (the first of several) for the three months to March was up a full percentage point from the 1.2% annual rate in the December quarter and came in well above market forecasts of 1.7%.
Quarter-on-quarter GDP rose a solid 0.5% in the first quarter, accelerating from December’s 0.3% gain.
Domestic demand rose 0.4% compared to the flat result for the December quarter (and contraction in the three months to September) as consumers loosened their pursestrings and opened their wallets. That saw private consumption also rise 0,4% in the quarter, up from no movement in December.
Residential investment growth was up 0.7% from 0.4% the quarter prior, while quarter-on-quarter growth in government consumption was 0.1%.
Net exports rose 2.1% quarter on quarter in March, down from the 3.4% pace in December. Imports detracted 0.2 percentage points from growth as they rose 1.4% from the from the December quarter.
