After Japan had been closed off to the world for more than two years, it is finally open again, and its economy is growing! Tourist hot spots are bustling with activity; hotel reservations have become a rarity due to high demand. Even securing seats at some of its most popular restaurants has become an increasingly difficult task. It’s clear that Japan is back in business!
Japanese Economy Gives Signals of Growth
Japan’s economy, ranked the world’s third strongest after the United States and China, grew at an annualized rate of 0.6%, with data released on Tuesday demonstrating a slow but steady recovery in private consumption and tourism spending. Despite predictions that progress could reach 2%, this moderate expansion was less than anticipated.
Following a third-quarter surprise contraction last year, where import prices rose due to inflation and the weak yen suppressing spending, Japan’s economy saw an uptick that led to two consecutive years of growth. The latest results capped off their path to recovery from the economic destruction caused by Covid-19—real terms showed 1.1 percent in 2022, followed by 2.1 percent growth in 2021; this demonstrates just how strong and resilient Japan has been throughout these trying times!
Tourism Is One Of The Biggest Reasons Behind This Growth
A primary cause of this is the Japanese government’s initiative to inspire its citizens to adapt their lifestyles to the coronavirus. Unfortunately, fatalities have risen sharply since COVID-19 started, but many Japanese people have become lax in their cautionary efforts. As Kobayashi noted, “The suppressed demand has steadily picked up” due partly to popular governmental subsidies that urge travel and dining out.
The flood of tourists coming back to Japan has given the weak yen a huge boost, especially those businesses that benefit from their return. According to Saisuke Sakai, senior economist at Mizuho Research and Technologies, tourism is bouncing back faster than expected due to ‘revenge spending’ by people who had been stuck indoors for so long. Moreover, with the cheaper yen helping them financially, visitors are splurging on luxuries such as makeup and other goods in droves!
On the other hand, Not All News Are So Positive
Unfortunately, the weak yen has caused food and energy prices to skyrocket as Japan relies heavily on imports for these goods. The inflation rate in December hit an all-time high of 4 percent over the past 40 years, which decreases wages that have not seen any growth throughout those decades. Mr. Kobayashi believes there is still potential for economic recovery if Chinese tourists start coming back to Japan despite certain restrictions put in place due to their escalating Covid numbers since ending their “Covid zero” policy.
Despite some indications of the potential for a recession in the US or Europe, Mr. Kobayashi believes that Japan will stay on course with steady growth fueled by consumer demand.
You might check: Türkiye Earthquake: Why Was It So Deadly?
