Oil, auto demand drives Japan’s Jan-Mar economy rebound

Japan's economy rebounded in January-March after a slump in the previous two quarters, partly supported by arecovery in domestic demand in the oil product and automotive sectors.

Seasonally adjusted gross domestic product (GDP) grew at 1.6pc/yr in January-March, according to government data released on 17 May. The economy recovered from its two-quarter slump, where the annualised GDP rate fell by 0.1pc in October-December2022and by1pc in July-September 2022.

Increased demand in both the private and public sectors contributed to the GDP growth in January-March. Final consumer spending, which accounts for more than 50pc of GDP, grew by 2.4pc/yrfrom 0.8pc in the previous quarter. But exports of goods and services fell sharply by 16pc in the same period of comparison.

The Japanese government has paid subsidies to mitigate the impact from swelling electricity and city gas retail prices since January, on top of those for refined oil products such as gasoline, gasoil, kerosine, heavy fuel oil and jet fuel. This financial support may have partly and indirectly supported private consumption, especiallyas the government has been easingCovid-19 pandemic restrictions.

Japan's jet fuel consumption averaged 70,288 b/d in January-March, up by 6pc from the previous quarter, according to the Petroleum Association of Japan. This suggeststhat the country's travelling demand and associated spending have increased.

Japan's automotive sector has also seen a gradual recovery in car production and demand, following the easing of auto part shortages. Car production by the country's eight major automobile companies rose by 22pc on the year to 818,000 units in March, excluding commercial vehicles.

By Motoko Hasegawa