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Japan’s Economy Recovers From COVID Jerk, Global Slowdown Clouds Outlook

A worker bicycles near a factory at Keihin Industrial Zone in Kawasaki, Japan, February 17, 2016. REUTERS/Toru Hanai/File Photo

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  • April-June GDP grows 2.2% annualized vs. +2.5% exp.
  • Consumption increases by 1.1% vs. expected +1.3%
  • Foreign demand neither contributes to nor reduces GDP
  • Global slowdown, rising cost of living cloud prospects

TOKYO, Aug 15 (Reuters) – Japan’s economy expanded for a third straight quarter on solid private consumption, April-June data showed on Monday, a sign the country is finally beginning a much-delayed recovery from a COVID-19 outbreak. induced downturn staged.

However, the outlook remains uncertain due to a resurgence in COVID-19 infections, slowing global growth, supply shortages and rising commodity prices pushing up household living costs.

Gross domestic product (GDP) in the world’s third-biggest economy grew an annualized 2.2% in the second quarter, accelerating from a revised 0.1% increase in January-March, government data showed. It was smaller than an average market forecast for a 2.5% gain.

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The growth was largely driven by a 1.1% surge in private consumption, which accounts for more than half of Japan’s GDP, the data showed. However, the increase was less than market forecasts for a 1.3% increase.

Capital spending rose 1.4%, more than a median market forecast for a 0.9% expansion, the data showed.

External demand neither added nor detracted from GDP growth, compared to a forecast contribution of 0.1 point.

Japan lagged other major economies as it fully recovered from the pandemic on weak consumption, partly attributed to the containment in activity that lasted until March.

That has made the Bank of Japan an outlier in the global phase of monetary tightening sweeping through many economies amid rising inflation.

Policymakers are hoping pent-up demand will support consumption until wages rise enough to offset the rising cost of living. However, analysts say there is uncertainty over whether companies will hike wages amid rising risks of a slowdown in global demand.

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Reporting by Leika Kihara and Tetsushi Kajimoto; Additional reporting by Kantaro Komiya Editing by Shri Navaratnam

Our standards: The Thomson Reuters Trust Principles.

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