Who knew? Japan is turning into the sleeper source of economic growth this year.
Freshly revised first-quarter GDP numbers show the world’s third-largest economy charged ahead at a 3.9% annualized clip. That reading was revised sharply higher from the 2.4% preliminary reading.
As you can see from the chart above, Japan has had other bright spots—but then it would do something to sabotage its own efforts at an economic resurgence. For instance, in early 2014 it raised taxes to help manage its debt burden. (At roughly 250% of GDP, according to Moody’s, Japan has one of the world’s weightiest debt loads.)
But as any Keynesian worth his or her salt would have predicted, that was a mistake. It sank the country back into recession and temporarily stalled the momentum generated by prime minister Shinzo Abe’s economic overhaul program, known as Abenomics. Abe wisely delayed another tax increase in late 2014. Meanwhile the Bank of Japan continues its aggressive monetary policy aimed at weakening the yen, pushing up the stock market, digesting large chunks of the country’s debt, and finally getting a bit of inflation going.
Now though, after a couple of lost decades Japan is emerging as an important source of strength for a global economy that’s in the midst of shifting the gears of growth. China is slowing. Latin American giants like Brazil are struggling. Russia appears on the verge of an ugly recession, and other commodity-based economies are looking weak.
Meanwhile, Europe seems to be finally getting its act together. And the US is shaking off a sluggish first quarter. It’s early yet, but if Japan can string together a few more quarters of decent growth, that would be a really welcome addition to the global economic scene.