Japan was able to stay on course for growth in 2022, although the figures for the last quarter of the year were well below market forecasts. Japan’s gross domestic product (GDP) rebounded 0.2% in the October-December period after experiencing a revised 0.3% contraction in the third quarter, the government cabinet reported on Tuesday. These figures are a far cry from the growth analysts were expecting for the period and the 2.1% that the Japanese economy achieved in 2021.
The economic data was released shortly before Prime Minister Kishida formally nominated Kazuo Ueda as the Bank of Japan’s nominee for governor. If approved by parliament, where the executive has a majority, Ueda, 71, would be replaced in April by Haruhiko Kuroda, the architect of Japan’s ultra-loose monetary policy, who has led the company for ten years. Ueda, a respected economist and academic, would face mounting pressure when he took office to normalize ultra-loose policies and phase out the Bank of Japan’s massive stimulus program.
The world’s third largest economy has grown by 0.2% in the last three months of 2022, a much slower pace than expected due to the slump in investment and the fall in private inventories (the total value of goods and services produced in a country) , said Mari Iwashita, chief market economist at Daiwa Securities, as quoted by Bloomberg. For the expert, the results were “surprisingly weak” and showed that “it will take longer for the economy to return to pre-pandemic levels”. And vigilant: “We cannot be optimistic about the first quarter of 2023.”
Key factors supporting the recovery from the third-quarter decline included a resurgence in international tourism after two and a half years of tight border controls, the yen’s recovery against the dollar, which hit its lowest low in 24 years in June – and the Increase in domestic consumption.
Private consumption, which accounts for more than half of Japan’s GDP, rose 0.5% in the fourth quarter, in line with the median market forecast. However, capital spending fell 0.5%, a steeper decline than the 0.2% forecast by economists. “We expected a rebound after the unexpected drop in the previous October-December quarter, but growth is not strong. Nevertheless, the data supports the forecast that the economy is recovering moderately,” Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research and Consulting, is quoted as saying by the Kyodo news agency. “Although there is strong demand for accommodation, leisure and inbound tourism, prices do not stop rising and are expected to continue to rise. It’s a tug of war,” he adds.
inflation
Inflation in Japan is at its highest level in four decades, doubling the central bank’s 2% target. Amid the inexorable rise in prices, the Japanese prime minister has urged companies to raise employee wages to create a virtuous cycle of growth fueled by corporate profits and private consumption.
Japan’s Finance Minister Shunichi Suzuki said on Tuesday that data shows the Japanese economy is gradually recovering with the help of government measures, although he warned that “the slowdown in foreign economies could also hit the Japanese economy.” “We need to pay attention to the impact of inflation, supply chain restrictions, volatility in financial markets and the Covid situation in China,” Suzuki added.
Japan has lagged other powers in recovering from the peak of the pandemic, largely due to longstanding restrictions it imposed to curb the spread of Covid. According to data released this Tuesday, full-year 2022 GDP grew by 1.1%, a slower pace than last year’s 2.1% and below the International Monetary Fund’s (IMF) expectation of 1.4%. The economic slowdown was mainly caused by the decline in exports compared to the increase in import costs, analysts point out. According to the latest IMF forecasts, the Japanese economy will grow by 1.8% in 2023.
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