AP

Japan’s economy contracts, but at smaller rate than thought

Jun 7, 2022, 8:20 PM | Updated: 9:00 pm

TOKYO (AP) — The Japanese economy contracted in the first quarter, but at a slower pace than earlier estimated, the government said Wednesday.

The world’s third-largest economy contracted at an annual rate of 0.5%, according to Cabinet Office data. That was smaller than the 1.0% contraction in the preliminary estimate for Japan’s real gross domestic product, or GDP, released in May.

The annual rate shows how the economy would have grown if the quarterly rate were to continue for a year. Japan’s economy contracted 0.1% in January-March from the previous quarter, better than the 0.2% quarter-on-quarter contraction in the preliminary data.

Consumer spending and other private demand was stronger than previously thought.

The upward revision was a pleasant surprise for analysts.

“Looking ahead, we expect GDP to rebound in 2Q mainly due to better private consumption, yet higher inflation on commodities will likely limit the gains in real terms,” Robert Carnell, regional head of research Asia-Pacific at ING, said in a report.

The expected reopening of the country to tourists as limits imposed to curb COVID-19 infections are lifted, should also boost growth.

On the negative side, Japan, which imports almost all its oil, much of its food and various products, has been slammed by rising prices for energy and other commodities, partly because of the war in Ukraine.

Japan has for years been fending off deflation, or a spiraling down of prices. Low wage growth and an aging and shrinking population have slowed economic activity and discouraged corporate investment.

Bank of Japan Gov. Haruhiko Kuroda apologized Tuesday for recently referring to a “tolerance for higher prices” among Japanese people, a comment interpreted as welcoming higher prices. Kuroda was grilled in parliament, where he told legislators his comment was inappropriate.

Kuroda has championed a policy aimed at boosting near-zero inflation to around 2%, but progress was slow until global prices for oil and other commodities surged in recent months.

Some analysts say Japan has gradually lost its competitive edge because it hasn’t done enough to nurture innovation and free up new sources of growth bridled by old-time bureaucracies.

One source of worry is the diving value of the yen, now trading at a 20-year low of about 133 yen to the U.S. dollar.

Although a weak currency is a boon for Japanese exporters, boosting the value of overseas earnings, analysts say the weak yen also reflects a weak economy. Rising interest rates in the U.S. and other countries compared to Japan, where interest rates are at near zero, will likely keep the yen weak for some time.

Prime Minister Fumio Kishida is pushing what he calls “new capitalism.” He announced an outline of his strategy this week, aimed at jump-starting growth by pushing digitization, defense spending, start-up ventures and sustainable energy. He has also invited investments, declaring in English, “Invest in Kishida.”

Former Prime Minister Shinzo Abe, Japan’s longest serving leader, pushed “Abenomics,” focused on super-easy lending that was meant to spark inflation and therefore promote growth. Some critics say Abenomics failed to build a strong economy and its pitfalls are part of the reason now behind the weak yen.

___

Yuri Kageyama is on Twitter https://twitter.com/yurikageyama

Copyright © The Associated Press. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.

AP

Israeli Embassy...

Associated Press

US airman dies after setting himself ablaze outside Israeli Embassy in Israel-Hamas war protest

An active-duty member of the U.S. Air Force has died after he set himself ablaze outside the Israeli Embassy in Washington, D.C.

2 days ago

Biden and Trump to visit Mexico border Thursday immigration...

Associated Press

Biden and Trump both plan trips to the Mexico border Thursday, dueling for advantage on immigration

President Joe Biden and former President Donald Trump will make dueling trips to the U.S-Mexico border on Thursday.

2 days ago

Arizona and New York attorneys feud over extraditing suspect...

Associated Press

Why Alvin Bragg and Rachel Mitchell are fighting over extraditing suspect in New York hotel killing

Maricopa County Attorney Rachel Mitchell says she isn't into extraditing a suspect due to her lack of faith in Manhattan’s top prosecutor.

6 days ago

A Gila monster is displayed at the Woodland Park Zoo in Seattle, Dec. 14, 2018. A 34-year-old Color...

Associated Press

Colorado man dies after being bitten by pet Gila monster

A Colorado man has died after being bitten by his pet Gila monster in what would be a rare death by one of the desert lizards if the creature's venom turns out to have been the cause.

7 days ago

Police clear the area following a shooting at the Kansas City Chiefs NFL football Super Bowl celebr...

Associated Press

1 dead, many wounded after shooting at Kansas City Chiefs’ Super Bowl victory parade

One person died after 22 people were hit by gunfire in a shooting at the end of the Kansas Chiefs' Super Bowl victory celebration Wednesday.

14 days ago

This image from House Television shows House Speaker Mike Johnson of La., banging the gavel after h...

Associated Press

GOP-led House impeaches Homeland Security Secretary Mayorkas — by one vote — over border management

Having failed to impeach Homeland Security Secretary Alejandro Mayorkas the first time, House Republicans are determined to try again Tuesday.

15 days ago

Sponsored Articles

...

Midwestern University

Midwestern University Clinics: transforming health care in the valley

Midwestern University, long a fixture of comprehensive health care education in the West Valley, is also a recognized leader in community health care.

...

Collins Comfort Masters

Here’s 1 way to ensure your family is drinking safe water

Water is maybe one of the most important resources in our lives, and especially if you have kids, you want them to have access to safe water.

...

Collins Comfort Masters

Avoid a potential emergency and get your home’s heating and furnace safety checked

With the weather getting colder throughout the Valley, the best time to make sure your heating is all up to date is now. 

Japan’s economy contracts, but at smaller rate than thought