Japan emerges from recession on post-COVID consumer rebound

Tokyo, May 17 (BNA): Japan’s economy emerged from recession and grew faster than expected in the first quarter as a post-coronavirus recovery in consumption offset global headwinds, boosting hopes for a sustainable recovery.

But growing signs of slowing growth in the United States, Europe and China are clouding the outlook for the export-dependent economy, adding to uncertainty about how quickly the central bank can phase out its massive stimulus programme, Reuters reported.

“Consumption will continue to support growth as the removal of COVID restrictions boosts spending on tourism and services,” said Yoshiki Shinki, chief economist at Dai-ichi Life Research Institute.

“However, the economic recovery will be moderate as weak external demand will affect exports. It will be a tug of war between strong domestic demand and stagnant exports,” he said.

Government data showed, on Wednesday, that the world’s third-largest economy grew by 1.6% year-on-year in the January-March period, far exceeding market expectations for a 0.7% gain, marking the first rise in three quarters.

The growth followed a 0.1% drop in the fourth quarter of last year, which was revised down from a 0.1% rise. The decline represents two consecutive quarters of contraction, consistent with the definition of a technical recession.

Private consumption, which makes up more than half of the economy, grew 0.6% in the January-March period from the previous quarter, as the country’s reopening from the pandemic boosted spending on services. This beat expectations for a 0.4% increase.

Capital spending also surprised, expanding 0.9%, defying expectations for a 0.4% decline.

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Japanese Economy Minister Shigeyuki Goto said Japan’s nominal gross domestic product reached a record high of 570.1 trillion yen ($4.22 trillion), supported in part by rising prices.

However, Goto said caution is required amid emerging risks.

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