A 10-day holiday for the new emperor boosted the Japanese economy Photo: AFP/File
business

Japan's economy grows faster than expected on new imperial era holidays

20 Comments
By Miwa Suzuki

Japan's economy grew at a faster-than-expected clip in the second quarter, official data showed on Friday, helped by celebrations to usher in a new imperial era.

Gross domestic product (GDP) in the world's third-biggest economy grew 0.4 percent from the previous quarter, the Cabinet Office said, beating analysts' median forecast of 0.1 percent.

The third straight period of expansion will also bolster Prime Minister Shinzo Abe's determination to push through a controversial sales tax hike in October despite warnings it could weigh on growth.

Shoppers are rushing to make purchases before the rate rises from eight percent to 10 percent on October 1 and this boost for consumption also helped push GDP higher, economists said.

An unprecedented 10-day holiday for the enthronement of Emperor Naruhito, which kicked off a new imperial era in Japan, also pepped up the figures, according to analysts.

However, trade frictions between the U.S. and China weighed on exports and corporate spending in some sectors such as machinery, said Yuichiro Nagai, senior economist at Mizuho Securities.

"But investments in software, research and development, and construction were good," he told AFP.

Nagai said a rush by consumers to buy before the sales tax hike will likely become even more pronounced in the July-September quarter, helping Japan log another quarter of growth.

And while the economy would likely contract in October-December due to the higher tax, it should rebound next year and avoid slipping into a recession, Nagai said.

"There is uncertainty over where the trade war will go... With the U.S. presidential election coming next year, however, I believe the main scenario is that they will find a compromise plan" later this year, he said.

The last time Japan hiked its sales tax, in 2014, the result was a slump in consumption and the wider economy and some economists have warned that now is not the time to raise the rate amid uncertainty over global trade and Brexit.

But Tokyo has vowed to go through with the plan unless there is a crisis on the level of the 2008 financial meltdown and Abe has promised countermeasures to cushion the blow on the economy.

SMBC Nikko Securities chief market economist Yoshimasa Maruyama said the Japanese economy would likely expand further in the July-September period but warned it could slide into a mild recession in October-December as the global economy slows.

"By the time autumn comes, debates for a supplementary budget will start and calls for additional monetary easing will get louder," he said in a report released ahead of the GDP announcement.

But Naoya Oshikubo, senior economist at Sumitomo Mitsui Trust Asset Management, was not so gloomy.

"Going forward, central banks are expected to continue easing, and the Chinese government will likely announce fiscal measures, resulting in a global economic recovery, which should help Japan maintain its momentum," Oshikubo said in a report.

Besides the planned tax hike, the impact from trade frictions between Japan and South Korea could be a headwind, he said.

"But both should be limited in their effects," he said as the affected goods make up only a fraction of Japanese exports.

© 2019 AFP

©2019 GPlusMedia Inc.

20 Comments
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Excellent news! Things are ticking along nicely, confidence up and people are spending. Tokyo 2020 will provide yet another major boost, with many millions of tourists spending yet more money!

-7 ( +6 / -13 )

Ganbare Japan!; Hold your thoughts until after the tax increase. Also, how much is due to Japanese spending and how much to tourist spending. How much longer can hard working Japanese continue to have a fair amount of disposable income? And, when the tax goes up to 10%, who will be paying the tax on duty free products and services?

6 ( +9 / -3 )

Since1981

Tax increase is small and overdue. Look at other countries in comparison. Japanese wages are going up too.

-11 ( +2 / -13 )

I think Ganbare J believes Abe more than Abe believes himself. A true fan.

11 ( +13 / -2 )

And YoY next year, it will be down.

3 ( +4 / -1 )

Ganbare

Has a right to be positive about Japan and it's future. His comment is not offensive or negative.

You people are always bothered by anyone who has something positive to say about Japan.

-10 ( +4 / -14 )

You people are always bothered by anyone who has something positive to say about Japan.

Funny. I am more often accused of being an apologist in this forum. But anybody who cares about Japan also cares about the problems it is facing. Ganbare is 100% hurray for Abe and hurray for the official government position, like a one-man PR campaign.

Cheering a good quarter following a special event is like cheering a new coat of paint on a house that is being devoured by termites. There are serious structural problems facing Japan in the future, and the head in the sand approach is not helpful to the country, but damaging.

9 ( +10 / -1 )

What's the surprise?

More holidays, more outgo.

Stop making the economy look good with illusions.

We are POOR!

Impose tax on Pachinko and religious groups, withdraw the stupid consumption tax system and stop unnecessary construction!

9 ( +10 / -1 )

Excellent news! Things are ticking along nicely, confidence up and people are spending.

As the article clearly states, the statistical bump is mainly attributable to people spending more during the 10 day holiday in honor of the new Emperor.

So unless Japan is going to get a new Emperor every 3 months its unlikely this is going to be anything more than a temporary bounce completely unrelated to longer term trends in the economy.

9 ( +10 / -1 )

Nothing like a bit of propaganda to see the in the new Emperor.

Meanwhile, the people continue to suffer in the real Japan...

3 ( +5 / -2 )

A growth of 0.4% only two months before the ne t sales tax hike is nothing to crow about. People used that extended holiday period as their last chance to get away before the tax increase. The figures for October, November and December will be very different. I expect to see a decline of at least 2% possibly more.

1 ( +3 / -2 )

What an achievement by the great government! (NOT!!)

I will wait for news coming up after the tax increase.

Guess they will look quite differently!

-1 ( +1 / -2 )

JT commenters are as negative as ever. If you even dare to say something positive, ANYTHING positive, about Japan, you get frowned upon, considered one sided, a blinded fan of [insert current prime minister], etc etc.

Not everyone is as pessimistic as y'all.

-6 ( +3 / -9 )

JT commenters are as negative as ever. If you even dare to say something positive, ANYTHING positive, about Japan, you get frowned upon, considered one sided, a blinded fan of [insert current prime minister], etc etc.

> Not everyone is as pessimistic as y'all.

The irony level is off the charts here. You seem very pessimistic about pessimism.

3 ( +5 / -2 )

So the less then 1% growth was due to the unprecedented 10 day holiday, monstrous TV sales and travel, being an unprecedented 10 day holiday. And that bumped the economy 0.4%. So it had absolutely nothing to do with government policies, just people having unprecedented time off. Might be a message there.

0 ( +0 / -0 )

Excellent news! Things are ticking along nicely, confidence up and people are spending. 

Delusion.

Stop making the economy look good with illusions.

We are POOR!

Reality.

1 ( +1 / -0 )

I take it the consumption boost from people having time off in a block is not going to encourage them toward getting people to have 10 days off every year.

It's just "that was good for the economy", and "as you were".

0 ( +0 / -0 )

Some thing isn't right, this article is dated Aug 9 and yet the Nikkei Business Review has the following article from August 10.

Japan retailers feel chill with big-spending Chinese gone

Drugstores, cosmetics shops and department stores see sales fall

https://asia.nikkei.com/Business/Business-trends/Japan-retailers-feel-chill-with-big-spending-Chinese-gone

0 ( +0 / -0 )

Shoppers are rushing to make purchases before the rate rises from eight percent to 10 percent on October 1 and this boost for consumption also helped push GDP higher, economists said.

Not me or anyone that I know....

0 ( +0 / -0 )

@kurisupisu - we dont advertise the fact that we're doing so... but trust me... we are going out and buying those things that we know we need to buy, that would be more expensive to buy after October. Air Conditioners being one item - My 20 year old one packed out, ages ago, so I'm buying one now...likewise replacing another than may give up soon. This additional 2% increase is seriously going to dent the economy after October. And if you dont think so, then ... you're not living in the real world.

The currently Strong Yen helps the locals, purchase cheaper imported items - clothing / food/ air-conditioners from overseas... but it does not help the Tourists.

The Chinese Tourist market is going to dry up pretty quickly soon, as internal issues there put paid that that. And the relations between Japan and S. Korea are rapidly putting and end to that source of income... so things are going to get bad here in Japan.

So a Strong Yen will be the only thing to keep Japan afloat... but how to do so ? Raising interest rates will be a disaster for the populace who already have to borrow heavily to purchase homes. Currency manipulation .. would result in wrath from the US... so things don't look so good here.

I'd think it'd be cheaper for Japan to resolve its regional disputes and move ahead.

0 ( +0 / -0 )

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