As a result of the country’s weak currency and increased exports, Japan’s economy expanded significantly quicker than anticipated in the three months leading up to the end of June.
Gross Domestic Product of world’s third-largest economy increased at an annualized rate of 6% over the time in question.
It represents the largest increase in the past two and a half years and is roughly twice as fast as the rate of growth that experts predicted.
The decline in the value of the yen was beneficial to Japan’s exporters since it made Japanese-produced products more affordable to buyers in other countries.
The yen’s value has dropped significantly relative to that of major currencies in recent months, and it has lost more than 10% of its value relative to the dollar so far in 2018.
Fujitsu’s chief economist, Martin Schulz, was quoted as saying to the media that the strong GDP estimates were due to the weakening of the yen.
The gross domestic product is one of most essential metrics for determining whether or not an economy is functioning well. Businesses are better able to determine the optimal time to grow their operations and add new employees, and the government is better able to determine the optimal levels of revenue collection and expenditure.
In recent months, the nation’s automobile manufacturers, including Toyota, Honda, and Nissan, have seen greater demand for their exports, which has contributed to a surge in their profits.
In recent months, prices of commodities on global markets, such as oil and gas, have decreased. This is despite the fact that a weak currency makes it more expensive for the country to import goods.
This has led to a decrease in the value of imports, which was down 4.3% from the previous quarter. This was referred to as “a major culprit for GDP growth” by Nobuko Kobayashi of EY.
After relaxing entry requirements at the end of April, Japan has seen an increase in the number of tourists visiting the country, which has been beneficial to the economy.
According to Japan National Tourism Organization, as of the month of June, the number of tourists coming from other countries has increased to more than 70 percent of what it was before the pandemic.
After China abolished a prohibition on group travel earlier this month, it is anticipated that spending by visitors will give the economy of the country an even bigger boost than it already had.
Prior to the epidemic, travelers from China accounted for more than a third of the total expenditures made by tourists in Japan.
As a result, this is helping to mitigate the effects of the sluggish recovery of consumption within the nation as a whole following the pandemic.
According to Mr. Schulz, “the most significant challenge that Japan will face in the second half of the year is that the domestic economy is cooling.”
He brought attention to a variety of challenges, one of which was a decline in private consumption, which accounts for more than half of Japan’s economic output.
Workers in Japan have seen their pay increase at the quickest rate in 28 years, but with inflation lingering near a four-decade high, their salaries have been declining in real terms for well over a year. This is the case despite the fact that their pay has increased at the highest rate in 28 years.