The Japanese economy grew an annualized 2.7% in the first quarter of 2022, surpassing earlier estimates of 1.6% made last month, according to government data. The growth can be attributed to robust spending. Economists surveyed by Reuters had expected growth of 1.9%. This growth is a positive sign for the world’s third-largest economy as it continues to recover from the pandemic.
Private Demand Rises, Exports Drop
Quarter-on-quarter, the economy expanded by 0.7%, higher than Reuters’ estimate of 0.5%. Private demand rose by 1.2%, and domestic demand rose by 1%. However, exports of goods and services dropped by 4.2%, and imports fell 2.3%, according to revised government data.
Government Plans to Cut Crisis-Mode Spending
The Japanese government’s latest full-year economic blueprint, according to local media Kyodo, includes a plan to cut “crisis-mode spending.” The blueprint also reiterated Prime Minister Fumio Kishida’s plans to achieve economic growth alongside wage hikes as part of his drive to accelerate wealth redistribution. It also included measures that aim to restore fiscal health, such as encouraging companies to offer higher wages and further invest in human resources.
Bank of Japan’s Next Monetary Policy Meeting Approaches
The Bank of Japan’s next two-day monetary policy meeting is scheduled for next week. The bank has previously kept its policy unchanged, and the upcoming meeting is expected to continue this trend. However, with the economy growing more than expected, the bank may face pressure to adjust its policy to maintain growth and combat inflation.
Overall, Japan’s economy’s growth in the first quarter of 2022 exceeded expectations, with private demand rising and domestic demand remaining stable. The government’s plans to cut crisis-mode spending and encourage companies to invest in human resources may help restore fiscal health and accelerate wealth redistribution. The upcoming Bank of Japan meeting may provide insight into the bank’s plans to maintain growth and combat inflation.