Japan's Economy Escapes Recession as Quarterly Growth Data Gets Upward Revision

Japan's economy grew by 0.4% in the last quarter of 2021, which is an improvement from the initial estimate of a 0.4% contraction, according to government data released on Monday.

The revised GDP figure exceeded economists' expectations, who had predicted a 1.1% increase in a Reuters poll.

Japan's economy, now the world's fourth-largest behind Germany, managed to avoid a technical recession thanks to the latest data showing companies spent more on plants and equipment.

The GDP grew by 0.1% quarter-on-quarter, which was a positive surprise compared to the initial reading of a 0.1% drop. The median forecast had predicted a 0.3% rise.

Capital expenditure rose by 2.0% compared to the previous quarter, which was a positive surprise considering the government's initial report of a 0.1% decrease. However, it fell short of the market's expectation of a 2.5% increase.

This revision was influenced by the speculation that the Bank of Japan might abandon negative interest rates soon, possibly even this month. This speculation was fueled by recent optimistic remarks from board members, indicating that Japan was making progress towards the central bank's 2% inflation goal.

The BOJ will have a two-day policy-setting meeting on March 18 and 19.

During the same period, private consumption, which makes up approximately 60% of Japan's economy, decreased by 0.3% in October to December. This was slightly lower than the initial estimate of a 0.2% drop.

Last week in Japan, inflation-adjusted real wages continued to decrease for the 22nd consecutive month in January. At the same time, household spending in the same month experienced the largest drop in 35 months.

External demand remained unchanged from the preliminary reading, contributing 0.2 percentage points to real GDP.

Editor's P/S:

Japan's economy is showing signs of recovery, with the latest GDP figures exceeding expectations. This is a positive development after a period of stagnation, and it is encouraging to see that businesses are investing more in plants and equipment. However, the data also highlights some challenges, such as the ongoing decline in private consumption and real wages. The Bank of Japan's upcoming policy-setting meeting will be closely watched, as there is speculation that the central bank may abandon negative interest rates soon. This would be a significant move and could have a major impact on the economy.

Overall, the latest economic data from Japan is mixed. There are some positive signs, but also some challenges. It remains to be seen whether the recovery can be sustained, and the Bank of Japan's policy meeting will be a key event to watch. of abandoning negative interest rates. It remains to be seen whether such a move would stimulate economic growth and address the ongoing inflation and consumption issues.