TOKYO, Japan”•Japan has posted its longest economic expansion in over a decade on the back of a pickup in household and company spending, data showed Monday.
The country’s gross domestic product grew by 1.0 percent in the April-June period, marking the sixth straight winning quarter in the longest string of gains since 2006.
The world’s number three economy has been picking up steam, mainly on the back of a surging exports including smartphones parts and memory chips, with investments linked to the Tokyo 2020 Olympics also giving growth a boost.
But the latest GDP figures”•which translate into a whopping 4.0 percent annualized growth rate”•were driven by robust domestic demand and capital spending, which offset a quarterly decline in exports.
Private consumption picked up 0.9 percent in the second quarter. Individual spending accounts for more than a half of Japan’s GDP.
The second quarter growth blew past market expectations for a 0.6 percent rise, according to figures from the Cabinet Office. It was well up from a 0.4 percent expansion in January-March GDP.
The labor market is tight and business confidence is high but efforts to lift inflation have fallen flat despite years of aggressive monetary easing by Japan’s central bank.
The latest reading nonetheless means Japan’s economy has had its best string of gains since the tenure of popular former prime minister Junichiro Koizumi.
Monday’s figures are good news for the current prime minister Shinzo Abe”•whose brief and underwhelming first term as Japan’s premier came directly after Koizumi.
A string of short-term leaders followed Abe’s first term before he swept back to power in late 2012 on a pledge to reignite Japan’s once-booming economy with a plan dubbed Abenomics.
The scheme”•a mix of huge monetary easing, government spending and reforms to the economy”•stoked a stock market rally and fattened corporate profits.
Some critics have cast doubt on the plan, as heavily indebted Japan grapples with low birthrates and a shrinking labor force.
Abe has seen his public support ratings plummet in the past few months over an array of political troubles, including allegations of favoritism to a friend in a business deal.
“This is a good result and tailwind for Abenomics,” Shinke Yoshiki, chief economist at Dai-ichi Life Research Institute, said of Monday’s data release.
“Consumption and corporate investment are particularly strong, a result of brisk corporate earnings and improved business confidence.”
In a commentary, Barclays said: “The strength of private consumption reflects an improvement in employment and income conditions (e.g., drop in unemployment, four consecutive years of increasing base pay), but likely also such factors as favorable weather during that period.”
Still, wages have not been rising enough to kickstart tepid inflation, and few analysts expect the same kind of growth next quarter.
“Japan’s structural problems have not changed: aging population, decreasing working age population, deteriorating fiscal conditions,” said Junko Nishioka, chief economist of Sumitomo Mitsui Banking Corp.