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TOKYO—Japan’s economy recovered its prepandemic size in the April-June quarter thanks to strong consumer spending and higher exports, but inflation may start to weigh on growth later this year.
The world’s third-largest economy after the U.S. and China expanded 0.5% in the three months to June from the previous quarter and 2.2% on an annualized basis, which reflects what would happen if the pace continued for a full year.
Adjusted for inflation and seasonal factors, Japan’s economy in the latest quarter was bigger than in the final quarter of 2019, the first time it has accomplished that since the Covid-19 pandemic hit in early 2020. In the April-June period, private consumption increased 1.1% from the previous quarter as consumers returned to stores and restaurants.
Economy Minister
Daishiro Yamagiwa
said Monday he expects growth to continue but is concerned about global trends.
“We need careful attention to destabilizing factors that could prevent our economic recovery,” Mr. Yamagiwa said. He cited rising energy and food prices, monetary tightening in the U.S. and elsewhere and the uncertain course of the pandemic.
Economists expect solid consumption in the current July-September quarter because people in Japan are enjoying their first summer since the onset of the pandemic without government restrictions on travel or public activities. The government of Prime Minister
Fumio Kishida
has maintained its stance on reopening the economy despite a recent resurgence in Covid-19 cases.
Annual inflation is running at slightly above 2% in Japan—mild by U.S. standards, but the first broad price increases Japanese consumers have seen in decades.
Photo:
Akio Kon/Bloomberg News
Exports and production are also expected to improve in the current quarter, with the negative impact of lockdowns in Shanghai and elsewhere in China expected to fade. Exports grew 0.9% in the April-June quarter, helped by increasing demand from the U.S. and Europe.
Daiwa Securities economist Mari Iwashita said she expects annualized growth of around 2% to 3% in the current quarter. However, higher energy and food prices, driven in part by a weak yen that raises the cost of imports, are likely to take their toll on consumers, she said.
She said an economic slowdown is possible next year if wage growth remains sluggish and people hold back on spending to preserve their savings.
Annual inflation is running at slightly above 2% in Japan. That is much milder than in the U.S., where the economy shrank for a second quarter in a row in the second quarter owing to inflation above 8% and the Federal Reserve’s interest-rate increases. Still, this is the first year in decades that Japanese consumers are seeing such broad price increases.
Mr. Kishida on Monday instructed his cabinet to work on additional measures to ease the burden of inflation. The government plans to put together a package by early September.
Write to Megumi Fujikawa at megumi.fujikawa@wsj.com
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Appeared in the August 15, 2022, print edition as ‘Japanese Economy Tops Late 2019 Size.’
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