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Japanese economy rebounds

Updated August 11, 2018

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Japan’s real gross domestic product in April-June rose 0.5 per cent from the preceding January-March quarter, marking the first rise since the October-December, the Cabinet Office announced in its interim report Friday.

The GDP on an annualised basis, on the assumption that the growth continues for 12 months, increased 1.9pc.

The nation’s real GDP, excluding effects from price fluctuations, had grown for eight consecutive quarters from January-March 2016 until falling into negative territory in January-March this year. Friday’s report showed that the economy is displaying signs of modest recovery after temporarily stagnating.

A major factor behind the return to positive growth in April- quarter is the recovery of consumer spending, which accounts for about 60pc of GDP.

On a quarterly basis, private consumption rose 0.7pc from the preceding quarter, the first increase since the October-December quarter, after a negative 0.2pc reading in the January-March quarter.

Vegetable prices, which rose in the preceding quarter due to bad weather, have stabilised, resulting in restoring households’ consumer appetite. Another factor behind the increase is believed to be the brisk sales of automobiles and home electrical appliances following a steady trend of wage hikes.

Capital investment rose 1.3pc from the preceding quarter, a much larger increase than the preceding period’s growth of 0.5pc. Buoyed by brisk business performance, investment in production machinery was in good condition.

Investment in labour-saving measures to cope with worker shortages apparently has increased as well.

Exports continued to grow, though the gain was slight at 0.2pc. Public works investment fell 0.1pc and investment in housing dropped 2.7pc.

Nominal GDP, which closely reflects the household sentiment, rose 0.4pc, marking its first rise since the October-December quarter. On an annualised basis, the figure increased by 1.7pc.

“Consumer spending has recovered, but households haven’t loosened up their wallets due to a limited increase in wages,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities Inc.

“There are many factors causing anxiety, including a risk of trade friction intensifying around the world.”

Bloomberg/The Washington Post Service

Published in Dawn, August 11th, 2018