Japan's economy rebounds after COVID jolt

According to the April-June data released on Monday, Japan's economy grew in the third quarter as private consumption remained strong, a sign that the country has started to emerge from the COVID-19-induced downturn with much delay.

However, the outlook of Japan's economy remains uncertain amid a resurgence of COVID-19 infections, slowing global growth, supply constraints and rising raw material prices that are pushing up the cost of living for households. Gross domestic product (GDP) in the world's third-largest economy grew by 2.2% year-on-year in the second quarter, accelerating from a revised 0.1% increase in the January-March period, government data showed. This was lower than the median market forecast of 2.5%. According to the data, growth was largely driven by a 1.1% increase in private consumption, which accounts for more than half of Japan's GDP. However, this was lower than market forecasts of a 1.3% increase. According to the data, capital spending rose by 1.4%, more than the median market forecast of 0.9%. External demand neither added to nor detracted from GDP growth, compared to the estimate of a 0.1 percentage point contribution. Japan has lagged behind other major economies in fully recovering from the impact of the pandemic due to weak consumption, partly blamed on activity restrictions that lasted until March. This has made the Bank of Japan an outlier in a phase of global monetary tightening that has gripped many economies with rising inflation. Policymakers hope pent-up demand will support consumption until wages rise enough to offset rising living costs. But analysts say there is uncertainty over whether companies will raise wages amid a growing risk of slowing global demand.