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RTÉ News
3 days ago
- Business
- RTÉ News
Japan posts unexpectedly strong GDP, helped by resilient exports
Japan's economy grew much faster than expected in the second quarter as export volumes held up well against new US tariffs, giving the central bank some of the conditions it needs to resume interest rate hikes this year. Gross domestic product (GDP) rose 1% on an annualised basis, government data showed today, marking the fifth quarter of expansion in a row after the previous quarter's contraction was revised to growth. However, analysts warn global economic uncertainties fuelled by US tariffs could weigh on the world's fourth-largest economy in the coming months, especially as car makers struggle to keep prices down for American customers. "The April-June data masked the real effect of Trump's tariffs," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. "Exports were strong thanks to solid car shipment volumes and last-minute demand from Asian tech manufacturers ahead of some sectoral tariffs. But these aren't sustainable at all," the economist said. The increase in GDP was helped by surprisingly resilient exports and capital expenditure and compared with median market expectations for a 0.4% gain in a Reuters poll. It followed a 0.6% rise in the previous quarter, which was revised up from a 0.2% contraction. The reading translates into a quarterly rise of 0.3%, better than the median estimate of a 0.1% uptick. The strong data contrasts with China, which saw factory output growth hit an eight month low and retail sales slow sharply in July. Private consumption, which accounts for more than half of Japan's economic output, rose 0.2%, compared with a market estimate of a 0.1% increase. It grew at the same pace as the previous quarter. Consumption and wage trends are factors the Bank of Japan is watching to gauge economic strength and determine the timing of its next interest rate action. Capital spending, a key driver of domestic demand, rose 1.3% in the second quarter, compared to a rise of 0.5% in the Reuters poll. Net external demand, or exports minus imports, contributed 0.3 of a point to growth, versus a 0.8 point negative contribution in the January-March period. The US imposed 25% tariffs on cars and car parts in April and threatened 25% levies on most of other Japanese imports. It later struck a trade deal in July that lowered tariffs to 15% in exchange for a US-bound $550 billion Japanese investment package. Japanese economy minister Ryosei Akazawa told a press conference that the latest GDP results confirmed that the country's economy was recovering modestly. "Looking ahead, we expect better employment and income conditions and policy measures to support the modest recovery," he said. "But we need to be mindful of downside risks from US trade policies". Akazawa said the US tariffs are likely to push down Japan's real GDP by 0.3-0.4%. The Japanese government last week cut its inflation-adjusted growth forecast for this fiscal year to 0.7% from the initially projected 1.2%, predicting US tariffs would slow capital expenditure while persistent inflation weighs on consumption. Exports have so far avoided a major hit from US tariffs as Japanese automakers, the country's biggest exporters, have mostly absorbed additional tariff costs by cutting prices in a bid to keep domestic plants running. The economic resilience, along with a US-Japan trade deal struck last month, supports views the Bank of Japan could hike interest rate later this year. However, economists expect exports will suffer in the coming months as they start passing on costs to US customers. "It's possible the economy could slip into decline in the July-September quarter as exports slow," Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting, said. "For the economy to fully pick up, private consumption holds the key. Consumption could improve towards the end of the year as inflation gradually slows and sentiment recovers," he said.
Reuters
14-02-2025
- Business
- Reuters
Japan inflation likely hit 17-month-high in January on rising food prices: Reuters poll
TOKYO, Feb 14 (Reuters) - Japan's core consumer price inflation likely accelerated in January from the previous month and rose at the joint-fastest pace in 17 months due to high food prices and reduced energy subsidy, a Reuters poll showed on Friday. The core consumer price index (CPI), which includes oil products but excludes fresh food prices, was expected to have risen 3.1% in January from a year earlier, a poll of 18 economists showed. That compared with December's 3% rise and would be the joint largest year-on-year increase since August 2023 when it was 3.1%. "With food prices continuing to rise and government subsidies to oil refiners being reduced, the year-on-year increase is expected to widen from the previous month," said Shunpei Fujita, an economist at Mitsubishi UFJ Research and Consulting. The prices of rice, vegetables and other basic necessities have soared in recent months, and the government has said it will release 210,000 metric tons of stockpiled rice to ease distribution clogging and stabilise prices. The internal affairs ministry will release January CPI data at 8:30 a.m. on February 21 (2330 GMT on February 20). The poll also showed exports were expected to have climbed 7.9% in January from a year earlier, picking up from a 2.8% increase in December. Imports were estimated to have expanded 9.7% in January from a year earlier, resulting in a trade deficit of 2.1 trillion yen ($13.76 billion). Imports rose 1.8% in December. "The trade balance is significantly in deficit in January, as exports tend to be seasonally low," said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. Machinery orders, a highly volatile but leading indicator of capital spending for the coming six to nine months, probably edged up 0.1% in December from the previous month, following a 3.4% gain in November, according to the poll. The government will release the trade and machinery orders data at 8:50 a.m. on February 19 (2350 GMT on February 18). ($1 = 152.6300 yen)
