TOKYO: Japan’s economy grew faster than expected in the first quarter, official data showed Wednesday, helped by a recovery in inbound tourism after pandemic border restrictions were lifted. The 0.4 percent rise in gross domestic product beat market expectations of 0.2 percent, after hopes of a rebound fell flat in the final quarter of last year.
Spending by visitors to Japan “rapidly recovered” in the three months to March, Ryutaro Kono, chief economist at BNP Paribas, said ahead of the GDP data release. “Domestic household spending also appears to have recovered at an accelerated pace,” he added. The world’s third-largest economy fully reopened its borders to foreign tourists in October following two-and-a-half years of COVID restrictions that pummeled the economy. Japan welcomed nearly five million visitors in the first quarter of 2023 – still significantly fewer than eight million in the same period of 2019, a record-breaking year for inbound tourism to the country.
Private consumption was up 0.6 percent. Economists said the rise, centered around the service sector including restaurants and hotels, helped offset a negative impact from external trade. Exports of goods and services shrank 4.2 percent, against the backdrop of a slowing global economy and as the yen recovered from the lows registered last year. A boost from the hospitality industry helped Japan’s economy “secure positive growth, even if just barely”, said Taro Saito of NLI Research Institute.
Wednesday’s figure was stronger than the 0.0 percent seen in the last quarter of 2022, which had previously been revised down from a preliminary estimate of 0.2 percent growth. Looking ahead to the next three months, “dwindling exports are forecast to persist due to the slowdown of overseas economies, particularly in Europe and the United States,” Saito said.
However, this gloomy outlook is partly counterbalanced by brisk private consumption as economic activity normalizes, he added. UBS economist Masamichi Adachi also painted a sanguine picture. Despite “headwinds from a slower global economy”, the “high potential” of inbound tourism from China and expected rises in wages suggest growth will be “sustained”, Adachi wrote.
Inflation in Japan has slowed from four-decade highs, with consumer prices excluding volatile fresh food rising 3.1 percent in March. Last month, the Bank of Japan lowered its growth forecast for the 2023-24 financial year to 1.4 percent compared with 1.7 percent previously. The bank’s governors cited “extremely high uncertainties for Japan’s economy, including developments in overseas economic activity and prices, as well as developments in the situation surrounding Ukraine and in commodity prices”. — AFP