Japan avoids technical recession with a revised growth of 1%

Last month, figures indicated that Japan, the world’s third largest economy, shrank at an annual pace of 0.8% (1).

However, recently released data suggests that the economy grew at an annual pace of 1%, cementing the country’s reputation for unreliable gross domestic product data (2).

The revised growth figure decreases the chance that Japan’s central bank will deploy further monetary stimulus in the near future, despite slow progress towards its aim of 2% inflation.

The major change in the figures was an increased revision in inventories to 1.5 trillion yen from a previous estimate that inventories fell by 1.9 trillion yen (3). This may not look very promising for future growth if manufacturers are over supplying demand from companies and consumers.

“The upward revision from technical recession to some growth (…) is welcome and consistent with the improvement in national income,” said Masamichi Adachi at JPMorgan in Tokyo (3).

The Japanese government is encouraging companies to increase investment at home and raise wages to increase demand, stimulate the economy, and escape deflation.

Economists have forecast a 1.5% growth in the current quarter (3).