Revised figures released on Thursday revealed that Japan’s economy expanded more than estimated in January through March. A post-pandemic increase in domestic spending and firm restocking partially offset the impact of sluggish global demand on exports, resulting in this outcome.
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The annualized growth rate of Japan’s gross domestic product (GDP) from January through March was 2.7%, significantly higher than the preliminary estimate of 1.6% growth and the consensus projection of 1.9% growth among experts.
Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute, said: “Despite the global economic slowdown, the Japanese economy remains resilient — ample private consumption will continue to support the growth.”
However, Tsunoda cautioned that the rebound thus far may not be as strong as the headline data imply because inventories, rather than final demand, drove a large portion of the revised January-March rise.
A technical recession—two consecutive quarters of contraction—reported for the second half of last year was also removed from the numbers. According to the updated data, GDP increased 0.4% from October to December, rebounding from a 1.5% decline from July to September.
Revised GDP Growth for Japan in Q1 2023 Surpasses Expectations, Fueled by Capital Investment and Automakers
According to figures issued by the Cabinet Office, the January-March expansion equates to a 0.7% quarter-over-quarter increase, up from an initial reading of 0.4% and economists’ expectations for a 0.5% increase.
A government official speaking at a press briefing said a that the increase in capital investment and work-in-progress inventories, particularly among automakers and semiconductor equipment companies, contributed to the upward GDP adjustment.
In keeping with Ministry of Finance figures released last week that showed manufacturers’ business spending increased at the strongest rate since 2015, capital spending increased by 1.4%, up from 0.9%.
Private consumption, which accounts for more than half of Japan’s GDP, grew at 0.5%, slightly lower than the initial estimate of 0.6%.
The official continued that although new services-sector statistics have revised down consumption growth, the overall picture remains unchanged. This indicates that service spending, such as restaurants and hotels, contributed positively to the January-March GDP growth.
The total contribution of domestic demand to the first quarter’s revised GDP growth was 1.0 percentage points higher than anticipated.
In the meantime, net exports decreased by 0.3 percentage points, keeping with early projections. Despite additional statistics released on Thursday showing that Japan recorded a current account surplus for a third consecutive month in April, export growth was at a two-year low.
According to Shinkin’s Tsunoda, higher automobile exports due to reduced supply bottlenecks will help mitigate the blow from weaker shipments of other goods, such as electronic parts.