Japan’s economy is likely to have grown in the first quarter of 2023 at the fastest pace in three quarters, according to a Reuters poll of 17 economists. The growth is attributed to spending in the services sector, which offset weak business activity, and the Bank of Japan’s ultra-loose monetary policy.
Japan’s economy has been relatively unaffected by the deteriorating global economic conditions so far. This is due in part to the services sector enjoying a catch-up recovery after the country’s delayed reopening from the COVID-19 pandemic. As a result, the world’s third-largest economy is expected to have expanded by an annualized 0.7% in the first quarter of 2023, according to the median of 17 economist estimates.
Fastest growth rate in three quarters
The expected growth rate of 0.7% in the first quarter of 2023 would be the fastest since the 4.7% recorded in April-June 2022. It follows an expansion of just 0.1% in October-December, indicating a marked improvement in the country’s economic performance.
Services sector leading the recovery
The services sector, which makes up approximately 70% of Japan’s economy, has been the driving force behind the country’s economic recovery. The sector’s recovery has been supported by the easing of COVID-19 restrictions, such as the lifting of the state of emergency in many regions, and an increase in consumer spending.
However, the manufacturing sector has been struggling, with weak exports and supply chain disruptions weighing on production. Despite this, the Bank of Japan’s ultra-loose monetary policy has helped to keep borrowing costs low, which has supported business investment and consumer spending.
Outlook for Japan’s economy
The outlook for Japan’s economy remains positive, with the International Monetary Fund (IMF) projecting a growth rate of 2.5% for 2023. However, there are concerns about the country’s aging population and the slow pace of structural reforms. The government has implemented various policies to address these issues, such as encouraging more women and elderly people to enter the workforce, promoting innovation and entrepreneurship, and increasing investment in infrastructure.
Conclusion
Japan’s economy is showing promising signs of recovery in the first quarter of 2023, with the services sector leading the way. The Bank of Japan’s ultra-loose monetary policy has also played a significant role in supporting economic growth. While there are challenges ahead, such as the aging population and the need for structural reforms, the country’s government and policymakers are taking steps to address these issues and promote sustainable growth.
