Japan GDP growth will rely on exports and wage rises

Significance

Foreign trade accounted for almost the entire increase, more than making up for declines in household consumption and government spending.

Impacts

• The government will claim credit for growth, but voters will see this as theoretical unless incomes rise faster.
• Strong GDP growth will make it hard to argue against raising the sales tax as scheduled in 2019.
• Economic growth and a shrinking labour force will force employers to raise compensation eventually.
• Japan is vulnerable externally if oil prices rise further or the Fed hikes rates too fast.