Japan GDP Growth Beats Expectations In First Quarter

The 0.4 percent rise in gross domestic product beat market expectations of 0.2 percent, after hopes of a rebound fell flat in the final quarter of last year.

In the three months to March, spending by tourists visiting Japan "rapidly recovered," Ryutaro Kono, chief economist at BNP Paribas, said ahead of the GDP data release.

"Domestic household spending also appears to have recovered at an accelerated pace," he added.

The world's third-largest economy fully reopened its borders to foreign tourists in October after two-and-a-half years of tough Covid restrictions that pummelled the economy.

Economists said a rise in private consumption centered around the service sector, including restaurants and hotels, helped offset a negative impact from external trade.

Exports of goods and services shrank 4.2 percent, the data showed, against the backdrop of a slowing global economy and as the yen recovered from the lows registered last year.

Private consumption was up 0.6 percent.

A boost from the hospitality industry helped Japan's economy "secure positive growth, even if just barely", said Taro Saito of NLI Research Institute.

Wednesday's figure was stronger than the 0.0 percent seen in the last quarter of 2022, which had previously been revised down from a preliminary estimate of 0.2 percent growth.

Looking ahead to the next three months, "dwindling exports are forecast to persist due to the slowdown of overseas economies, particularly in Europe and the United States," Saito wrote.

But the gloomy outlook can partly be counterbalanced by brisk private consumption as economic activity normalises, Saito added, estimating an annualised one-percent growth for Japan's economy.

UBS economist Masamichi Adachi also painted a sanguine picture.

Despite the "headwinds from a slower global economy", the "high potential" of inbound tourism from China and expected rises in wages suggest growth will be "sustained", Adachi wrote.