With six consecutive quarters of growth, the Japanese economy is gaining strength. Local consumers and businesses are adding momentum.
Japan’s GDP increased by 4%, more strongly than expected, with the pace of expansion also accelerating in the second quarter. This marks Japan’s longest period of uninterrupted growth, free of any contractions, since 2005-2006. The recovery has largely been led by exports; however the latest boost has local origins. Spending by Japanese consumers and businesses contributed more to the economy than international trade.
According to the government’s Cabinet Office, consumer spending rose by 3.7%, and business investment expanded by nearly 10%, offering a positive outlook for the world’s third-largest economy.
Prime Minister Shinzo Abe’s economic stimulus plan, dubbed Abenomics, called for Japan’s central bank to inject more money into the financial system. A weakened yen made Japanese cars, electronics and other exports more competitive – a win for multinationals such as Toyota and Panasonic, but with little impact on wages or spending at home. This appears to be turning around.
Exports remain crucial to the Japanese economy, but last quarter, imports surged. “Exports aren't particularly strong in volume terms but will gradually recover ahead. The import figures, on the other hand, underscore the strength of domestic demand,” said Takeshi Minami, Chief Economist at Norinchukin Research Institute. Demand for personal computers and digital cameras from China was particularly high.
Last year Prime Minister Abe announced a major government spending program, allocating money to social programs and infrastructure. The data suggest that the money could be finding its way from account books to the real economy, the New York Times reports. Not all of the domestic growth came from private citizens and businesses. Public investment grew at a rate of 22%.
