c.2019 New York Times News Service
TOKYO — Japan reported a surprising economic upswing in the first three months of the year, but the sunny figures belied continuing weaknesses that threaten the country’s prospects.
Japan’s economy, the third largest in the world behind the United States and China, grew at an annualized rate of 2.1 percent in the first quarter of 2019, according to data released Monday by Japan’s Cabinet Office. Economists had expected the economy to shrink because of weakened demand from China as that economy slows.
A closer reading of the Japanese figures gave economists little reason to cheer. Private consumption and exports fell. Japan’s surprise performance stemmed in large part from a sharp drop in imports, which fell more dramatically than exports. That wider trade surplus enhanced Japan’s bottom line, even as it signaled that Japanese businesses and consumers are reluctant to spend.
“As weak imports should signify weak domestic demand, it is definitely not a reason to rejoice,” said Takuji Okubo, chief economist for Japan Macro Advisors, a research firm.
The surprise expansion comes despite an increasingly gloomy global outlook. China, a major contributor to global growth, has been hit by its trade war with the United States and by its efforts to contain its debt problems. Japanese companies across a wide range of industries, especially in sectors that supply unfinished components to Chinese manufacturers, have already made huge downward revisions to their earnings forecasts.
The report offers a mixed bag for the country’s prime minister, Shinzo Abe, who has made reinvigorating Japan’s economy a centerpiece of his appeal to voters. While the headline figure could give him political cover to push his policies past lawmakers, it does little to change Japan’s difficult position.
“In terms of policy implications, the seemingly positive growth is unlikely to convince policymakers all is well,” Okubo said.