Japanese economy expands 1.5%, beating expectations

TOKYO — Japan's economy grew 1.5 per cent in the three months to June, official data showed on Tuesday, beating expectations on the back of strong exports.

The average forecast for quarter-on-quarter growth in the world's third-largest economy had been 0.8 per cent, according to Bloomberg News.

The data, released by the Cabinet Office, means the economy grew an annualised 6.0 per cent, compared with the market expectation of 2.9 per cent, giving Japan three straight quarters of growth.

The data, however, also underscored the continued weakness of domestic demand as families struggle in the face of raising prices.

"Japan's exports have recovered as the supplies crisis eased for the auto sector while the yen's depreciation provided support," Ryutaro Kono, chief economist at BNP Paribas, wrote in a note issued before the release of the data.

Hiroyuki Ueno, senior economist at SuMi TRUST, also said pent-up demand from the pandemic and an increase in capital investment were boosting the economy. 

"The hospitality sector is expected to remain a driver of economic growth due to the increase in inbound tourism, as the pandemic is now in the rearview mirror," he wrote in a report ahead of the release of the data.

"Although the number of inbound visitors to Japan has not yet returned to pre-pandemic levels, the per capita consumption of tourists during their stay in Japan has increased, partly due to the weak yen," he wrote. 

The US economy, the world's biggest, has also defied expectations of a slowdown, picking up pace in the second quarter of the year, supported by business investment and consumer spending. Its labour market has remained robust as well.

The strength comes despite US policymakers' efforts to ease demand and rein in inflation, fueling hopes that the Federal Reserve's aggressive campaign of interest rate hikes will lower price increases without triggering a major recession.

Britain earlier this month also reported better-than-expected growth, with the economy expanding 0.2 per cent in the April to June period.

A major worry for the global economy, besides high inflation, remains China.

China's economy showed further signs of weakness in the second quarter as data last month revealed growth had missed expectations and that consumers remained cautious, adding pressure on leaders to unveil further stimulus.

The disappointing figures followed a string of below-par readings indicating the post-COVID recovery was already going off the rails and highlighting the tough work authorities face reviving momentum.

China's National Statistics Bureau said the world's number two economy grew 6.3 per cent on-year in April-June, faster than the previous three months but much weaker than the 7.1 per cent predicted in an AFP survey of analysts.

That came despite having a very low base of comparison with last year, when the country was hit by a series of Covid lockdowns in major cities.