The Japanese economy appears to have returned to growth in the last quarter of 2022, as the country started to reopen to tourists, according to a recent poll conducted by Reuters. The results showed that Japan’s economy grew at an annualized rate of 2.0% in the October-December quarter, after a 0.8% contraction in the July-September quarter. This growth was driven by a recovery in services demand, which boosted private consumption by 0.5%. Additionally, a surge in service exports following Japan’s relaxation of border controls to tourists likely added 0.4% to GDP growth.
Despite this growth, Japan’s economy is expected to decelerate in the current quarter as faltering Western demand and inflation at four-decade highs weigh on business activity. Corporate capital expenditure is expected to have contracted for the first time in three quarters, declining 0.2% from July-September. The household spending is expected to have dropped 0.2% in December, marking the second consecutive month of decline.
These results could impact the upcoming annual labour talks in Japan, as solid wage hikes are seen as essential for the economy’s post-pandemic recovery. This is also crucial for the Bank of Japan’s exit from its decade-long ultra-loose monetary policy.
The Japanese government is set to release preliminary October-December GDP data on February 14th, as well as current account balance and household spending data in the following days. Additionally, the annual wholesale price inflation is expected to have stayed elevated at 9.6% in January, according to data that will be released on February 10th.
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