Japan’s real GDP rose by 0.2% q-o-q, driven by strong private consumption and exports. We maintain 2024 growth forecast at 0.6%, supported by steady demand for automobiles and semiconductors. However, risks such as global economic uncertainty and fluctuating energy prices could pose challenges. Policymakers are expected to focus on measures to sustain economic momentum and address potential downside risks.
Key View
- Preliminary data show that Japan’s real GDP increased by 0.2% q-o-q (annualised 0.9%), slightly stronger than our estimate of 0.1% q-o-q.
- We maintain our 0.6% 2024 growth forecast, which implies a 0.5% q-o-q expansion in Q4 supported by steady private consumption recovery and exports.
- We also maintain our 2025 annual forecast of 1.0% y-o-y as private consumption and export of automobile and semiconductor equipment to grow steadily.
Preliminary data show that Japan’s real GDP increased by 0.2% q-o-q (annualised 0.9%), slightly stronger than our estimate of 0.1% q-o-q (see chart below). The modest expansion was driven by a recovery in private consumption and exports. Indeed, private consumption growth surprised to the upside with a 0.7% y-o-y (0.9% q-o-q) rise in Q3, contributing 0.5 percentage points to headline growth. That marked a rebound from a 0.7% y-o-y fall in Q2 and outperformed our 0.4% forecast. Notably, non-durable goods grew strongly by 1.7% y-o-y, compared with 0.4% y-o-y in Q2. One reason is that summer bonuses on average matched the record high of 4.2% y-o-y growth for large companies. Another factor was the JPY40,000 in tax credits per household in June. Durable goods consumption also grew by 7.6% y-o-y in Q3, partly due to pent-up demand – a safety testing scandal had forced autos production to stop in Q1 and Q2. Meanwhile, exports grew by 0.1% q-o-q (1.5% y-o-y) as automobile and semiconductor equipment shipments remained robust thanks to resilience in the global economy.
Japan has shown remarkable resilience in the face of global economic challenges, with positive growth momentum expected to persist in the coming years. Despite the aftermath of the COVID-19 pandemic and ongoing supply chain disruptions, the nation’s economy has displayed a robust recovery driven by increased consumer demand and a rebound in exports. Government stimulus measures and supportive monetary policies have further bolstered economic activities, setting a strong foundation for sustained growth.
Moreover, Japan’s commitment to innovation and technological advancement plays a crucial role in its economic trajectory. The nation is a global leader in robotics, artificial intelligence, and sustainable energy solutions. Investments in these sectors not only enhance productivity but also create new jobs and opportunities for the workforce. As Japan continues to push for digital transformation, businesses are expected to adopt modern technologies that will further stimulate economic expansion.
Looking ahead, Japan’s aging population poses challenges; however, it also presents opportunities for growth and evolution in various sectors. Initiatives to enhance workforce participation, particularly among women and older individuals, will counterbalance demographic concerns. By fostering a culture of inclusivity and innovation, Japan is well-positioned to maintain its growth momentum and remain a key player in the global economy.
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