Not Just Export Earnings, but Consumer Spending and High Wages to Fuel the Japanese Economy

Published By : 16 Feb 2015 | Published By : QYRESEARCH

Several economists and business analysts have reported that the economy of Japan during the fourth quarter did not perform as per expectations. This as a result, pointed towards a difficult situation with regard to economic growth, along with marginal gains from exports. The unfavorable export performance can be attributed to weak domestic consumption and investment. The gross domestic product of the Japanese economy grew at 2.2%, which turned out to be less than the expected rate of GDP growth of 3.7%. 

As against the earlier quarter, the nominal GDP increased at an annual growth rate of 4.5%. Nominal GDP does not account for any changes in price. The softness observed in the economic rebound points towards the challenge facing the Japanese Prime Minister for restoring the 3rd largest economy of the world from almost 20 years of economic stagnation. It is expected that the growth of this economy this year will mainly be propelled by greater consumer spending and higher wages, even more than exports. Export is one area wherein, the lower value of the yen has led to high profits for companies such as Toyota Motor Corp. 

An economist at HSBC has stated that Japan has been successful in moving out of the recession state and is aiming at average acceleration in economic growth. The weakening of the yen by 28% as against the dollar has been the consequence of Shinzo Abe coming into power in 2012, with a rationale of reviving the economy with his policies on reflation. Lower level of the Japanese currency not only led to higher export earnings but also dampened consumer sentiment and higher costs of import. 
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