Japan’s economy grew at an annual rate of 2.2% in the fourth quarter, as consumer spending increased as pandemic precautions were relaxed.

TOKYO, Japan (AP) — The Japanese economy grew at an annual rate of 2.2% in the April-June quarter, according to the government, as consumer spending increased as pandemic precautions were gradually lifted.

After keeping its borders closed to most visitors for the duration of the pandemic, Japan has gradually begun reopening to tourism, while business has returned to more or less normal after various voluntary restrictions were eased.

This means that families are going out and spending more money, even though coronavirus infection rates have risen due to the spread of the omicron variant of COVID-19.

The world’s third-largest economy grew at a flat rate in the first quarter of this year, up from a 0.5% contraction in the previous quarter, according to a revised estimate. The reading for the fourth quarter fell short of the 2.5% annual growth forecast. In quarterly terms, the economy expanded by 0.5%, exceeding its pre-pandemic level but falling short of analysts’ expectations.

“However, it suggests that pent-up demand from the reopening of COVID-19 could continue to underpin growth in the future,” IG’s Jun Rong Yeap wrote in a commentary.

Private consumption increased at a 4.6% annual rate but appeared to be constrained by rising prices.

After decades of fighting deflation, or falling prices and wages, rising global energy and commodity prices are putting a strain on Japanese budgets and balance sheets. Japan imports nearly all of its oil, gas, and coal, as well as food and industrial components.

The rate of inflation remains low. The Bank of Japan’s most recent estimate for the fiscal year ending March 2023 is 2.3% consumer inflation, well below the recent four-decade high levels of 8%-9% in the United States, which are now showing signs of easing.

However, the Japanese yen has also fallen to two-decade lows against the dollar, making imports more expensive. The dollar was trading around 133 yen on Monday. It recently reached nearly 140 yen.

Experts attribute the recent dramatic increase in COVID-19 cases to record highs to increased availability of tests, more transmissible variants, and many Japanese being under-vaccinated despite the availability of shots.

It has increased uncertainty about the future. According to some analysts, Japan’s economic growth will slow again between July and September.

“We think the economy will slow again this quarter on the back of weaker consumer spending due to rising COVID-19 infections,” Takayuki Toji, an economist at Sumi TRUST, said in a report.

Much is dependent on what happens elsewhere, particularly in China, which is a major source of demand for Japanese exports. Chinese authorities’ efforts to eradicate COVID-19 by shutting down businesses, neighborhoods and even entire cities have slowed growth and disrupted manufacturing across the region.

“The lifting of the urban blockade in China should support exports, and capital investment should remain firm, but slowing global growth due to monetary tightening in the United States and Europe will take its toll,” Toji said.

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