The headline number sounded great. Japan grew at a 6% annual rate during the April-June quarter, twice as much as economists expected. Some have hailed this as the long-awaited rebound. Unfortunately, one swallow does not a spring make, especially not in this case.

           100% of Japan's growth was provided by an expansion of the trade surplus, 60% of which was due to a decline in imports rather than an expansion of exports. With the trade surplus rarely more than a few percent of GDP, it cannot lift the economy by itself for more than a short burst. Plus, it remains to be seen what will happen to the surplus in the coming quarters.

            Meanwhile, consumption, which amounts to half of the economy, shrank at a 2.1% annual rate. If not for trade, this decline would have lowered overall GDP by 1.1%. Business investment barely rose at all--just a 0.1% rise on an annual basis, the size of a rounding error.

            For details, see https://richardkatz.substack.com/p/trade-surplus-provided-all-of-japans

Richard Katz

https://richardkatz.substack.com/