Japan's economy demonstrated a modest annual growth rate of 0.9% in the July-September period, with consumer spending playing a crucial role in sustaining this expansion, according to government data released on Friday. This growth follows a 0.2% increase in the fiscal second quarter, marking the second consecutive quarter of expansion after a 0.5% growth in April-June.
The seasonally adjusted gross domestic product (GDP) reflects the value of a nation's goods and services. The annual rate indicates the hypothetical growth or contraction of the economy if the quarterly rate were to continue for a year.
Domestic demand saw an annualized growth rate of 2.5%, with private consumption, accounting for over half of Japan's GDP, expanding by 3.6% due to robust household spending, as per preliminary Cabinet Office data.
Recent improvements in wages and employment have contributed to this growth. While spending was slightly lower than the previous quarter, factors such as severe weather conditions affecting spending and factory operations were noted. Additionally, recent income tax reductions have stimulated consumer spending.
Exports increased by 1.5%, aided by the depreciation of the yen, making Japanese products more competitive internationally. However, the impact of the weaker yen was somewhat limited in the latest quarter, with the currency trading at 150-yen levels compared to 160-yen levels earlier this year.
Prior to the recent two quarters of growth, the economy had contracted by 0.6% in the January-March quarter, following a 0.1% growth in October-December 2023, indicating periods of contraction interspersed with weak expansion.
Analysts anticipate continued gradual growth in the Japanese economy, supported by overseas economic expansion. Anticipated winter bonuses in the upcoming months are expected to further bolster domestic demand.
However, Japan faces political uncertainty, with Prime Minister Shigeru Ishiba contending in a runoff this week to retain office amidst a resurgent opposition.
Unlike other developed nations grappling with inflation, Japan has struggled with deflation for years. Inflation stood at 2.5% in September, prompting speculation about the central bank's next move on interest rates. The Bank of Japan, which maintained near-zero interest rates for years to combat deflation, is gradually increasing them.
