Japan's Economy Grows 2.9% Amid Political Uncertainty and Global Risks

Japan's economy experienced a 2.9% annual growth rate in the April-June period, according to revised government data. This figure, slightly lower than the initially reported 3.1%, reflects both positive developments and ongoing challenges for the world's fourth-largest economy.

The growth was primarily driven by improved wages, increased spending, and robust exports. Domestic demand grew by 3.0% from the previous quarter, supported by healthy household consumption and private sector investments. Notably, exports surged by 6.1%, surpassing earlier estimates.

Fumio Kishida's government faces several risks, including the impact of U.S. economic performance on Japan's export-dependent economy. Additionally, political uncertainty looms as the ruling Liberal Democratic Party (LDP) prepares to select a new leader on September 27, who is likely to become the next prime minister.

Japan's economic landscape has evolved significantly over the years:

• The country experienced rapid growth from the 1960s to 1980s, known as the "Japanese economic miracle."
• Since the 1990s, Japan has grappled with deflation and low growth rates, a period often called the "Lost Decades."
• The Bank of Japan has maintained an ultra-loose monetary policy since 2013.
• Japan now faces demographic challenges with an aging population and low birth rate.
• The nation heavily relies on imports for energy due to limited natural resources.

Despite its current fourth-place ranking, projections suggest Japan may slip to fifth place in the coming years, behind the U.S., China, Germany, and India. This potential decline underscores the pressing need for economic revitalization.

Japan remains a global leader in technology and innovation, particularly in robotics and automation. The service sector contributes approximately 70% of the country's GDP, while major exports include automobiles, electronic equipment, and machine tools.

As Japan navigates these economic challenges, it continues to play a significant role in global affairs as a member of both the G7 and G20. However, the country's high debt-to-GDP ratio, exceeding 200%, presents an ongoing concern for policymakers and economists alike.