Japan surges in boost to global return

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Japan’s economy grew in three months to June, rising by 1pc in the second quarter in one of its longest terms of growth in recent times.

Economists had predicted growth of just 0.6 percent.

Strong customer spending coupled with increased capital expenditure helped provide the strong result, adding to the broader trend of economic restoration over the world.

The world’s third-largest economy has strived to reach sustainable solid growth for much of the past twenty years.

It’s now in its sixth consecutive quarter of economic expansion – the longest time of uninterrupted growth for more than ten years – raising confidences that the so-called Abenomics plan, named after Prime Minister Shinzo Abe, could have a good result. That plan includes imprinting money, intending to cut real interest rates and weaken the currency.

Studies of business activity mean growth has continued, so economists anticipate more positive figures in the months to come.

“We, therefore, expect GDP to rise for the seventh consecutive quarter in the third quarter, which would mark the longest expansion since the turn of the century,” said Marcel Thieliant at Capital Economics.

An economist at Citi, Kiichi Murashima, thinks that continued growth across different sectors will drive the economy upward.

“We believe businesses are gradually turning more positive about capital spending as corporate profits improve clearly,” he said.

“Consumer spending, business investment and residential investment look likely to increase.”

Joanna Davies, an economist at Fathom Consulting, dreads the current upbeat is “nothing more than a sugar high”.

“Japan’s economy remains weighed down by debt and the policy response to that debt,” she stated.

“In other words, monetary policy, as currently framed, is not only suffering from diminishing returns but has become counterproductive, holding back growth in productive potential by preventing the gales of creative destruction.

“Unless Japan breaks away from the pack and restores productivity growth, then it will struggle to achieve sufficient escape velocity.”

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