Japan defies recession fears, posts quarterly GDP growth - and that could bode well for Kiwi tourism

Tokyo, where the Nikkei 225 has reached - and surpassed - levels not seen since 1989 and where years of deflation and economic stagnation might finally be ending. Photo / 123RF

Japan’s economy defied gloom and dodged a recession, with GDP 0.4 per cent larger in late 2023 than a year earlier.

The new data released today revised previous forecasts which had Japan entering a recession in the fourth quarter.

Today’s revised quarterly GDP result came three weeks after target="_blank">Japan’s Nikkei 225 index reached an all-time high, eclipsing levels not seen since 1989.

Westpac chief economist Kelly Eckhold said the GDP growth was modest but there were positive signs for Japan — and perhaps New Zealand.

“The main thing that’s going on in Japan’s recovery is increased confidence that the authorities there are ready to move away from the zero-interest-rates policy.”

The Official Cash Rate in New Zealand is 5.50 per cent but the equivalent in Japan is -0.10 per cent and Japan’s 10-year government bond yield is 0 per cent.

Many countries have been battling stubbornly strong inflation in recent years but Japan has spent decades in the company of deflation.

But Eckhold told the Herald recent wage negotiations in Japan indicated inflationary pressures could be at work.

More Bank of Japan policymakers were warming to the idea of ending negative interest rates this month, Reuters reported.

Eckhold said the Japanese were also facing cost-of-living pressures, though not as intense as recorded in many other countries.

An improving Japanese economy would benefit New Zealand exporters and help more Japanese tourists visit New Zealand, Eckhold said.

He said Covid-19 seriously dented tourism.

“Visitors from Japan, along with visitors from China, are the ones we haven’t seen return in quite the same numbers.”

After dairy, travel was New Zealand’s second-biggest foreign currency earner in late 2023, according to Stats NZ.

Consumer wariness

Despite some recent signs of growth, Eckhold said consumers in Japan were not keen to splurge.

They might have something in common with Kiwis there.

Retail sales statistics, alcohol availability data, and declining import volumes in the December quarter all pointed to New Zealanders cutting back on so-called discretionary spending.

“Consumers generally have been relatively subdued,” Eckhold said.

That was especially true in Japan, where the economy had been flatlining for so long.

Nikkei

“The Nikkei has finally breached those highs that we hadn’t seen since the real halcyon days of the Japanese economy,” Eckhold added.

“That’s a reflection of global equity markets which are on a tear right now.”

That surge was especially true of markets with high exposure to tech stocks, he said.

John Weekes is the Online Business Editor. He has covered court, crime, politics, breaking news and consumer affairs.