New York Times: Packed With Tourists, Japan Returns to Economic Growth

After more than two years under some of the world’s tightest border controls, Japan is once again open for business. Tourist spots are packed. Hotels are booked out well in advance. And it’s getting harder to get a seat at many of the country’s best restaurants.

While that hasn’t been ideal for the many people who flocked to Japan in late 2022 hoping to experience its famous hospitality, it has been pretty good for Japanese businesses.

The country’s economy, the world’s third largest after the United States and China, grew at an annualized rate of 0.6 per cent from October to December, government data showed Tuesday. The modest increase lagged expectations that growth could reach 2 per cent.

The uptick followed a surprise contraction during the third quarter of last year, when inflation and a weak yen drove import prices up and suppressed spending.

The latest quarterly result capped off a second straight year of economic growth for Japan, which has traced a slow and sometimes uneven path to recovery from the economic devastation of the coronavirus.

Japan’s economy expanded in 2022 by 1.1 per cent in real terms, government data showed. That followed growth of 2.1 per cent in 2021.

The return to growth in the fourth quarter was partly driven by a recovery in domestic consumption, said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.

One big reason for that is that people in Japan, with the government’s encouragement, have begun to adjust to life with the coronavirus. While deaths have shot up to their highest levels since the pandemic began, many people in Japan have let their guard down.

With tourists flooding back into the country, the yen’s weakness has also become a net positive for some business sectors that benefit from their return, said Saisuke Sakai, senior economist at Mizuho Research and Technologies.

But the soft yen has continued to drive up prices for food and energy, both of which are highly import-dependent. Inflation was 4 per cent in December, its highest level in over 40 years. That takes a big bite out of wages that have seen little growth for decades.

This article originally appeared in The New York Times.

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