Japan's economy is growing "extremely fast", good things are coming?

On August 15, the Japanese Cabinet Office announced data showing that the country's Gross Domestic Product (GDP) growth rate in the second quarter of 2023 reached 6%.

Kinh tế Nhật Bản tăng trưởng 'cực kỳ nhanh', những điều tốt đẹp sắp tới?

Japan's economy grows beyond expectations. (Source: AFP)

The growth figure was higher than market expectations. Economists surveyed by Reuters had previously said the world's third-largest economy would grow 3.1% in the second quarter of 2023.

The economy of the country of the Rising Sun has grown at an "extremely fast" pace, according to Marcel Thieliant, head of Asia- Pacific at Capital Economics.

The New York Times assessed that Japan's positive growth rate was driven by exports, with the sector increasing 3.2% in the second quarter of 2023 compared to the previous quarter. This result shows that the global logistics network has largely resolved the bottlenecks.

In recent times, logistics problems have made it difficult to supply important components for the country's auto industry and other industries.

Tokyo has also benefited from the tourism sector, with a large number of tourists flocking to Japan after the country lifted restrictions due to the Covid-19 pandemic.

However, domestic consumer spending remains weighed down by inflation and a weakening yen, with personal consumption spending unexpectedly falling 0.5% in the second quarter of 2023 from the first quarter of 2023.

The Northeast Asian nation relies heavily on food and energy imports, and a persistently low yen against the dollar has pushed up import costs, leading to persistent inflation.

The depreciation of the local currency is largely due to the country's monetary policy, which has kept interest rates very low - even as the US and a host of major economies around the world have raised interest rates.

"A weak yen is a 'double-edged sword' for the economy. It can be a positive for exporters, helping to increase competitiveness and sales, but it weakens consumption," said Takahide Kiuchi , an economist at Nomura Research Institute.

Consumers are also feeling the delayed effects of the yen’s sharp fall, as businesses pass on higher import costs to consumers. Bank of Japan Governor Kazuo Ueda has acknowledged that rising prices are a “heavy burden” for households.

Japan has long suffered from relatively low growth. Profits and wages have been falling for decades. The problem looks set to get worse as the population shrinks and ages at a rapid pace.

The country has tried to overcome “economic inertia” with massive government spending and ultra-low interest rates to encourage companies and households to borrow. But growth has been weaker than expected for years.

Japan's latest growth figures could change that, the New York Times says. It's a sign of good things to come.

The economic outlook for the Asian nation looks “pretty bright,” said Izumi Devalier, chief Japan economist at Bank of America. A strong recovery will pave the way for stagnant wage and corporate profit growth, which will also allow the BOJ to begin to shift away from its ultra-loose monetary policy.

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