Meanwhile, the Japanese yen has appreciated to its highest level since the beginning of 2024.
Japan’s gross domestic product (GDP) grew at an annualised pace of 2.9% in the three months through June compared with the previous quarter, according to the report by the Cabinet Office on September 9.
This increase is not much lower than the 3.1% increase announced in the preliminary announcement in mid-August. Compared to the first quarter, Japan's GDP in the second quarter increased by 0.7%. The statistics show that the Japanese economic picture has become much brighter after many months of gloom.
Along with the economic recovery, the Japanese currency has strengthened significantly in recent weeks. In the afternoon session of September 13, the yen reached 140.67 yen per USD, increasing to its highest level since the beginning of 2024.
Just two days earlier, on September 11, the yen reached a 2024 high of 140.72, after Bank of Japan policymaker Junko Nakagawa said the decision to raise interest rates would be based on economic data.
The increased likelihood of the US Federal Reserve (FED) cutting interest rates by 0.5 percentage points at its meeting next week has provided a boost to the Japanese yen. According to Shoki Omori, chief economist at Mizuho Securities, this will narrow the significant interest rate differential between the US and Japan, which has weakened the yen.
Currently, Japanese financial experts predict that the country's domestic currency is likely to strengthen further in the coming weeks. They are watching for the possibility of further appreciation of the yen, when the US retail sales data for August 2024 is released before the FED meeting next week.
Accordingly, the yen could rise to 138 yen per USD. Analysts say the figures show that the economy of the "Land of the Rising Sun" is recovering positively.
The economy grew slightly slower than the government initially estimated in the second quarter of 2024 but was still strong enough for the Bank of Japan (BoJ) to maintain its trend of raising interest rates later this year.
BoJ Governor Kazuo Ueda is confident that the gradual economic recovery will continue. Japan's economy is forecast to continue growing in the third quarter, with growth reaching 1.7%, beating the BoJ's highest estimate of 1%.
However, some more cautious economists remain sceptical about the recovery of Japanese household consumption as the country has struggled with persistent inflation.
The main indicator of consumer inflation has remained at or above the BoJ's 2% target for the past 28 months. Although real wages have finally stopped falling after more than two years, Japanese consumer spending remains below pre-pandemic levels.
Before seeing the "light at the end of the tunnel" with such positive new signals, the Japanese economy has been through a long series of gloomy days.
In mid-May, the Government of Japan released data showing that the country's real GDP in the first quarter of 2024 fell 2% compared to the same period last year, marking the first decline in two quarters. Compared to the previous quarter, Japan's real GDP fell 0.5%.
Japan's economy started 2024 with a difficult first quarter due to domestic demand being affected by high inflation along with the temporary suspension of exports by Daihatsu Motor Co., a subsidiary of Toyota Motor Corporation, following a vehicle safety inspection fraud scandal.
Meanwhile, the external environment is also unfavourable with escalating conflicts in the Middle East, threats to the global supply chain, and weak import demand in most major economies.
Recovering growth, gradually controlled inflation, and the "sunshine" of the Japanese economy are positive signals for the regional and global economy.
Along with the US and Chinese economies having less difficulties, the European Union (EU) economy growing better than expected, and the stable recovery of the Japanese economy are helping to create more "bright spots" in the overall picture of the world economy in 2024.
