Japan's real gross domestic product (GDP) growth rate for the first quarter of this year was 0.5%, marking the second consecutive quarter of growth despite risks from the Middle East.
According to Nikkei Asia, the Japanese Cabinet Office announced that real GDP increased by 0.5% from the previous quarter and by an annualized rate of 2.1% from January to March. This figure surpasses the market forecast of 1.6% compiled by QUICK, a subsidiary of the Nikkei Group. Consequently, Japan's economy has continued to expand following a 0.8% annualized growth in the fourth quarter of last year.
Private consumption, which accounts for more than half of GDP, led the growth with a 0.3% increase from the previous quarter. Business investment in equipment also rose by 0.3%. Exports grew by 1.7%, while imports increased by 0.5%. However, the larger increase in exports boosted net exports, contributing positively to the growth rate. Private residential investment also saw a 0.5% rise.
Nonetheless, the GDP figures reflect only limited impacts from the conflict in the Middle East, which was triggered by the U.S. and Israel's attacks on Iran at the end of February. With rising raw material prices due to instability in the region, there are concerns that inflation and consumer spending may face increasing pressure on the Japanese economy in the future.
Other economic indicators are already showing the effects of the conflict. Household consumption in Japan fell by 1.3% in March compared to the previous month, and government surveys indicated weakened consumer sentiment in March and April. Industrial production also decreased by 0.5% in March from the previous month, significantly impacted by concerns over the supply of key raw materials like naphtha, which affected the chemical sector's output.
Experts predict that Japan's economic growth is likely to slow in the latter half of this year. A survey conducted by the Japan Economic Research Center among economists projected a growth rate of only 0.45% for the April to June period.
The impact of rising raw material prices is expected to be reflected in various product prices after summer, potentially fueling inflation and constraining the growth of real wages, which could hinder consumer recovery.
As a result, the Bank of Japan's monetary policy decisions are expected to become more complex. Nikkei Asia reports that the Bank of Japan may consider raising interest rates as early as June, but it faces the challenge of balancing concerns over slowing growth and inflationary pressures.
* This article has been translated by AI.
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