Japanese Economy on Right Track as Public Spending and Personal Consumption Increases

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Japanese Economy on Right Track as Public Spending and Personal Consumption Increases
Japanese Economy on Right Track as Public Spending and Personal Consumption Increases

Japanese Economy on Right Track as Public Spending and Personal Consumption Increases

Amidst strong personal consumption and public works spending, Japan is on the right track, the revised report from Japan says. The country has revised up its growth data for the April to June quarter and hopes that the national economy is on the right track as it expanded 0.9% during the period when compared to the previous three months.

Japan achieved an annualized growth rate of 3.8%, which is an outcome of the aggressive measures in recent months taken by the government to spur growth in the world’s third-biggest economy. Earlier the country achieved an annual growth rate of 4.1 per cent in January-March. The country has emerged from recession in 2012 and the recent growth is going to make a vital impact.

Market observers admit that the recent growth may be due to Abe’s reflationary policies and the BOJ’s aggressive stimulus. The country may also get a boost from the fact that it will be hosting the 2020 Olympics and Paralympics. Generally, trend has been that the host countries benefit a lot from such sports extravaganza.

According to estimates, the country will be spending an estimated $8bn (£5bn) on refurbishing old stadiums and building new ones which will encourage the construction sector and government spending. Any new construction of large scale will definitely help the Japanese economy recover fast from the past years’ slow down.

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2020 Tokyo Olympics

Corporate companies in the country believe that Tokyo winning the bid for the 2020 Olympics will boost confidence and will play a motivator’s role. The outcome of the event can be gauged from the fact that Japan’s Nikkei 225 index jumped more than 2% on Monday. Nikkei’s performance was also boosted by the upward revision to growth numbers in the national economy.

Major Challenges for Japan

Although preliminary GDP data for April-June fell short of market forecasts as there was weaker-than-expected capital spending, when it was revised it went to 1.3 per cent. Now the doubts over the tax hike and their effectiveness may be kept aside. Also, the government is trying to end economic stagnation and for that it is all set to fix its finances first.

The national economy of Japan has huge public debt which is double the size of its $5 trillion economy and it is a major problem. The problem is compounded when its past fiscal stimulus and the rising social welfare costs are counted.

To contact the reporter of this story: Jonathan millet at john@forexminute.com