Financial strength and jobs will buoy Japan's economy

Significance

Upward revisions to the previous two quarters brought Japan’s growth rate to more than 2% year-on-year and meant that Japan's economy has now reported six consecutive quarters of growth. Unemployment rates have reached new lows, and hourly wage rates are strengthening as output rises broadly across the economy.

Impacts

• Strong growth will make it hard for the prime minister to delay a scheduled consumption tax hike as a way to boost his flagging popularity.
• Growth will buoy the approval ratings of an unpopular government, allowing it to claim that its 'Abenomics' policies are achieving results.
• Vigorous growth and tighter labour markets will put upward pressure on wages and prices.
• Strong business expansion will improve productivity, putting downward pressure on prices.
• Stronger Asian economies and improvements in Europe should be seen in Japan’s exports in the next quarter.