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Japan’s economy expanded faster than previously estimated in the second quarter, signaling that the recovery maintained momentum despite subdued household spending and weaker business investment.
Gross domestic product grew at an annualized rate of 1.4% in the April-June quarter, according to Cabinet Office data released Tuesday. The revised figure exceeded economists’ forecast of 1.1% and was upgraded from the initial estimate of 1.1%. However, growth moderated from the 1.8% expansion recorded in the first quarter.
On a quarter-on-quarter basis, Japan’s GDP increased 0.4%, topping expectations for 0.3% growth. The economy had expanded 0.5% in the previous three months.
External demand was a major contributor to the stronger Japan GDP reading, rising 0.5% from the previous quarter. That marked an acceleration from the 0.3% increase recorded during the first quarter.
Domestic conditions remained less robust. Private consumption was unchanged during the quarter, matching forecasts but slowing from a 0.3% increase previously. The figures suggest Japanese households remained cautious about spending even as wage conditions improved.
Capital expenditure declined 0.9%, although the drop was smaller than the 1.2% contraction economists had anticipated, highlighting continued weakness in corporate investment.
There were more encouraging signs for consumers in separate wage data. Japan’s real wages climbed 2.4% year-on-year in July, marking their strongest increase since May 2021. Rising inflation-adjusted earnings could provide additional support for household purchasing power and future consumption.
The stronger-than-expected economic data could reinforce expectations that the Bank of Japan will tighten monetary policy further. Investors are increasingly considering the possibility of a 25-basis-point BOJ interest rate hike later this month.
The Japanese yen has strengthened alongside those expectations, recently reaching a seven-month high against the U.S. dollar. USD/JPY was down about 0.6% at 153.38 by 04:07 GMT, reflecting growing market bets on tighter BOJ policy as Japan’s economic recovery continues.
