Japan's economy is no longer in decline despite two headwinds ahead.

According to a survey by Reuters news agency (UK), Japan's economy is expected to recover in the second quarter of 2024, after declining in the previous quarter thanks to the recovery of industrial output and consumption.

Japan's economy expects a boost from industry. (Source: Kyodo)

Economists polled by Reuters expect Japan's gross domestic product (GDP) to grow 2.1% in the second quarter of 2024, recovering from a 2.9% contraction in the previous quarter. The Japanese government is scheduled to officially announce second-quarter GDP figures on August 15.

Private consumption is estimated to have risen 0.5%, marking the first increase in five quarters, as business wage growth boosted household incomes.

"Although slowing global demand and rising inflation are headwinds, the Japanese economy will benefit from wage growth and a recovery in auto production," said economist Saisuke Sakai at Mizuho Research & Technologies.

In addition, consumption has been a weak spot in the economy, as rising living costs hit households before they begin to feel the benefits of rising wages.

The Bank of Japan (BoJ) on July 31 decided to raise interest rates and reduce its purchases of government bonds, a further step to revive the economy amid a falling Yen.

On August 2, Japanese Finance Minister Shunichi Suzuki said that the government is closely monitoring developments in the financial market to assess the impact on the economy after the yen appreciated sharply and stocks fell, following the BoJ's interest rate hike.

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