Packed With Tourists, Japan Returns to Economic Growth

“The suppressed demand has steadily picked up,” Mr. Kobayashi said. That rebound has been supported by the return of popular government subsidies aimed at encouraging people to travel and eat out.

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.

Tourism has bounced back faster than expected, and “there’s revenge spending by people who have been waiting out the coronavirus,” he said, noting that the cheap yen had encouraged visitors to spend heavily on products like makeup and luxury goods.

Not all the news was good. The soft yen has continued to drive up prices for food and energy, both of which are highly import-dependent. Inflation was 4 percent in December, its highest level in over 40 years. That takes a big bite out of wages that have seen little growth for decades.

Mr. Kobayashi sees more room for the economy to expand as Chinese tourists begin to return in greater numbers. Japan has placed some restrictions on visitors from China because of concerns about the country’s surge in coronavirus cases since its “Covid zero” policy ended.

While there is some concern that the United States or Europe could enter a recession this year, Mr. Kobayashi expects that “demand will continue to lead modest growth for some time” in Japan.

Takahide Kiuchi, the executive economist at the Nomura Research Institute, said that many of his Japanese colleagues believed that Japan’s economy could expand faster than those of the United States or Europe this year, as consumption continues to rebound.

Article source: https://www.nytimes.com/2023/02/13/business/japan-economy-gdp.html