Japan Manages Growth in Final Quarter as Tourism Returns

February 14, 2023

TOKYO — The Japanese economy grew at an annual pace of 0.6% in October-December, the government reported Tuesday, managing to eke out growth after a contraction in the previous quarter.

The world’s third-largest economy has struggled amid restrictions related to the coronavirus pandemic, a shortage of imported parts from China and rising prices — especially energy — worsened by inflationary pressures and the war in Ukraine.

But the easing of COVID-19 restrictions, both abroad and in Japan, has helped a recovery in tourism and other economic activity.

The Cabinet Office reported the economy grew 0.2% in the last quarter, compared with July-September, when it contracted 0.3%. It grew 1.1% in April-June.

For the whole year of 2022, the seasonally adjusted real gross domestic product, which measures the value of goods and services a nation produces, grew 1.1% from the year before.

Both household consumer demand and government spending grew in the final quarter of last year. Exports grew but imports fell, data showed. The numbers suggest a gradual economic rebound.

In October, Japan eased its tough restrictions on inbound travel, imposed to curb the spread of COVID-19. Optimism has been growing about a return to normal.

Wage increases have been slow to come, despite recent signs of growing inflation even in deflation-prone Japan.

“Japan saw moderate growth,” said Hiroyuki Ueno, senior economist at SuMi TRUST, noting consumer services got a boost from increasing domestic travel and tourism. “Exports were resilient, reflecting the easing of supply constraints on automotive-related goods and moves to restore inventories overseas.”

The weakening yen tends to help growth, as it boosts the overseas earnings of Japanese exporters when they are converted into yen. The yen’s weakening reversed course somewhat in the last quarter, helping to alleviate the burden of soaring costs for imports.

The yen sank to about 150 yen to the dollar last year, but has recently been trading at about 130 yen.

As inflation stabilizes in the U.S. and Europe, price increases are expected to ease in Japan.


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