Japan’s Economy Grows Annualized 3.5% in Q2

According to the Cabinet Office, Japan’s economy grew a real 0.9% during the April–July period over the previous quarter, or at an annualized rate of 3.5%, on the back of recovering private consumption following the lifting of COVID-19 restrictions in March.
Real gross domestic product (GDP) expanded for the third consecutive quarter following nearly flat growth in the January–March quarter.
Consumer spending rose 1.2%, increasing for the third straight quarter, as more people dined out and traveled after Japan lifted COVID-19 restrictions.
Capital investment, another key pillar of domestic demand, grew 2.0%, following a 0.3% contraction in the previous quarter, propelled by software investment, and public investment also rose 1.0% in real terms from a decrease of 3.2% in the previous quarter.

Labour Force Survey Monthly Results¹

(1) Employment

The number of employed persons in July 2022 was 67.55 million, an increase of 20,000 over the same month the previous year. By gender, this included 37.14 million men, down 21,000 from the previous year, and 30.41 million women, up 190,000.

(2) Unemployment

The number of unemployed persons in July 2022 was 1.76 million, a decrease of 170,000 from the same month in the previous year, for the eleventh straight monthly decline. The seasonally adjusted unemployment rate in July was 2.6%, unchanged from the previous month. The unemployment rate for men was 2.8%, up 0.1 % over the previous month and 2.3% for women, up 0.2% over the previous month.

(3) Job Availability

Japan’s job availability in July stood at 1.29, up 0.02 over the previous month, showing an improvement for the seventh straight month. This figure means there were 129 jobs available for every 100 jobseekers. It was the highest ratio since 1.31 in July 2020, when the Japanese government declared the COVID-19 state of emergency for the first time. The number of job offers climbed 0.8% from the previous month, notably increasing in the accommodation and food service sectors. The number of job seekers declined 1.2%.
The ratio of regular employee job offers to applicants was 1.01, up 0.02 over the previous month. The ratio of new job offers to applicants, a leading indicator for the labour market, was 2.40, up 0.16 over the previous month.

Industrial Production ²

Japan’s industrial output in July increased 1.0% from the previous month, for the second consecutive month of increase. In particular the auto industry saw the biggest increase of 12.0% from the previous month, helped by the easing of parts shortages following the relaxation of COVID-19 restrictions in China.
While production, shipments and inventory ratio all increased, inventories remained flat.
The industries that mainly contributed to the increase were as follows: (1) motor vehicles; (2) general-purpose and business oriented machinery; and (3) production machinery, in that order.
According to the Survey of Production Forecasts in Manufacturing, production was expected to increase by 5.5% in August and by 0.8% in September.

Family Income and Expenditure Survey ³

(1) Expenditure of Households of Two Persons or More

Average monthly consumption expenditure of households of two or more persons in July was 285,313 yen, up 6.6% in nominal terms and up 3.4% in real terms from the previous year, for the second straight month, helped by the lifting of COVID-19 restrictions that prompted a rise in recreational and dining expenditure. By component, spending on culture and recreation rose 11.2% in real terms from a year earlier. However the levels of such expenditures are still lower than before the pandemic in July 2019

(2) Income and Expenditures for Workers’ Households

Average monthly income per household stood at 657,263 yen (including bonus payments), down 1.6% in nominal terms but down 4.6% in real terms from the previous year. The average level of consumption expenditure was 317,575 yen per month, up 4.9% in nominal terms and up 1.7% in real terms year-on-year.

Consumer Prices ⁴

The consumer price index (CPI) in July was 102.3 (2020 = 100), up 2.6% over the previous year and up 0.4% over the previous month, driven by higher commodity prices and a weak yen. Core inflation (CPI less food and energy) was up 1.2% over the previous year, marking the fourth straight month of increase. Energy prices surged 16.2%, with gasoline, kerosene, city gas, and electricity bills all marking double-digit gains. Food prices, excluding fresh food items, rose 3.7%, the largest increase since March 2015.

1. Source: Labour Force Survey Monthly Results (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/roudou/results/month/index.html)
2. Source: Indices of Industrial Production (Ministry of Economy, Trade and Industry)
   (https://www.meti.go.jp/english/statistics/tyo/iip/index.html)
3. Source: Summary of the Latest Month on Family Income and Expenditure Survey (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/kakei/156.html)
4. Source: Consumer Price Index (Statistics Bureau of Japan)
   (https://www.stat.go.jp/english/data/cpi/1581-z.html)