Ahead of the latest GDP data, the Daiwa Institute of Research said that “various growth factors are seen, including normalization of production for motor vehicles.”

“Continued improvements in the income environment, a strong appetite for capex spending on the part of corporations, and a comeback for inbound consumption” were also positive factors, the institute said in a report. This time last year, Germany overtook Japan as the world’s third-biggest economy, although India is projected to leapfrog both later this decade. The change in positions primarily reflected the sharp fall in the yen against the dollar, analysts said at the time.

In January, the Bank of Japan raised interest rates to their highest level in 17 years and signaled more hikes to come. The move, which left borrowing costs at the highest since 2008, was also underpinned by “steadily” rising wages and financial markets being “stable on the whole,” the bank said.

Even as other central banks raised borrowing costs in recent years—and started cutting again in 2024—the BoJ had remained an outlier. But it concluded in March 2024 that Japan’s “lost decades” of economic stagnation and static or falling prices were over, finally lifting rates above zero.

Source: FORTUNE