Economy dodges recession but other threats loom

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Hay fever takes a toll on Japan's economy

Japan has bounced again from a poor begin to the 12 months.

The world’s third-largest economic system grew at an annualized charge of 1.9% within the second quarter, in response to authorities figures launched Friday.

Boosted by a soar in spending by customers, the efficiency beat economists’ expectations and marks a restoration from a contraction within the first quarter of the 12 months.

It means Japan averted slipping right into a recession, which is usually outlined as two consecutive quarters of financial contraction. However the nation is prone to battle to develop strongly within the coming quarters.

“Progress is not as vigorous as final 12 months,” Marcel Thieliant, senior Japan economist at analysis agency Capital Economics, mentioned in a notice to shoppers.

Associated: EU and Japan signal commerce deal overlaying a 3rd of the world’s economic system

The economic system’s contraction within the first quarter snapped its longest streak of development for the reason that growth days of the late 1980s. However the two-year enlargement has stretched sources in Japan, which is battling issues that embody a quickly growing older inhabitants and persistently low inflation.

“Corporations are going through extreme labor and capability shortages that make it tough to maintain above-trend development,” Thieliant mentioned. He predicted that “exercise will stay sluggish for now.”

japan tokyo pedestrians

Japanese corporations that promote items abroad are going through uncertainty from escalating world commerce tensions. The nation’s large automakers, together with Toyota (TM), Nissan (NSANF) and Honda (HMC), are nervous about US President Donald Trump’s threats to impose tariffs on automotive imports.

Japan’s economic system has one other hazard on the horizon: the federal government is scheduled to hike the gross sales tax within the fall of subsequent 12 months. The final time it did so, Japan plunged right into a recession.

Customers are anticipated to offer the economic system a elevate forward of the rise by speeding to make purchases, however “a renewed hunch in spending as soon as the tax has been raised is all however assured,” Thieliant mentioned.

CNNMoney (Hong Kong) First printed August 10, 2018: 1:10 AM ET

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