Japan’s economy expanded in the three months to June, official data showed Monday after the government lifted Covid-19 restrictions on businesses.
The world’s third-largest economy grew 0.5 percent qoq on the back of stronger consumption and capital investment, but the increase fell short of market expectations of 0.7 percent.
While the country never imposed strict home bans during the pandemic, in March the government lifted virus restrictions aimed primarily at shop opening times.
But inbound tourism remains limited to group travel and the economy faces headwinds – from the energy price crisis to fears of a global recession fueled by biting inflation.
From April to June, private consumption grew 1.1 percent versus 0.3 percent recorded in the January-March quarter, according to data released by the Cabinet Office.
Capital expenditures increased 1.4 percent compared to a 0.3 percent decline in the previous quarter.
“After the government lifted a quasi-state of emergency in late March, service consumption recovered relatively strongly, while capital investment returned to growth,” BNP Paribas said in a note released ahead of the GDP data.
Mitsubishi UFJ Research and Consulting also found that “as the popularity of the Omicron variant slowed, private consumption increased steadily, particularly personal services, boosting the overall economy.”
The data are preliminary and GDP numbers are often revised in later months.
In May, the Cabinet Office reported that the economy had contracted slightly in the first quarter of 2022, but that was revised down to zero percent on Monday. This means that after a slight recovery in the last quarter of 2021, there was no change.
Consumer prices in Japan are rising, although not as rapidly as in the United States and many other major economies.
The Bank of Japan sees the rise in prices as temporary and is sticking to its long-held policy of monetary easing in a bid to achieve steady growth, a decision that has seen the yen fall to a 24-year low against the dollar is.
Supply chain disruptions from Covid-19 lockdowns in China and sky-high energy costs from the war in Ukraine have also created a challenging growth environment.
“We now believe the economic recovery is less impressive than we anticipated late last year, with an unexpected resurgence of Covid-19 infections earlier this year and now,” said UBS’s Masamichi Adachi and Go Kurihara in a Declaration before data is published.
Japan is currently experiencing a record-breaking wave of Covid-19 infections. A total of around 35,000 deaths from the disease have been recorded, far fewer than many other countries.
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