Tokyo – Japan’s latest economic data show a healthier-than‑expected expansion in the April‑June quarter. The Cabinet Office revised the annualised gross domestic product (GDP) growth rate from the preliminary 1.1% to 1.4%, while the seasonally‑adjusted quarterly increase stands at 0.4%, matching economists’ median forecast.
Key drivers of the upgrade
The upward revision stems primarily from a better‑than‑anticipated performance in capital spending. Revised figures indicate that firms’ outlays on plant and equipment fell only 0.9% year‑over‑year, an improvement over the initially estimated 1.2% decline and slightly worse than the 0.8% drop forecast by analysts.
Private consumption, which accounts for more than half of Japan’s economic activity, remained flat, aligning with the first reading. Meanwhile, external demand contributed a modest 0.5 percentage‑point boost to GDP, unchanged from the preliminary estimate, while domestic demand removed only 0.1 percentage point, better than the 0.2% drag originally reported.
Wage growth adds to optimism
In addition to the GDP revision, new salary data released on Tuesday showed that real wages—adjusted for inflation—rose 2.4% in July compared with a year earlier. This marks the strongest increase since May 2021 and represents the seventh consecutive month of wage gains, underscoring a strengthening labour market.
Implications for monetary policy
Senior economist Kento Minami of Daiwa Securities highlighted the significance of the results, noting that the growth figure is “not at all a situation where we need to worry about the economy.” He added that the data give the Bank of Japan (BOJ) confidence to continue its tightening cycle.
The BOJ raised its policy rate to a 31‑year high of 1.0% in June and is widely expected to add another 25‑basis‑point hike to 1.25% at its September meeting. Money‑market broker Tokyo Tanshi’s swap‑rate data suggest a 98% probability of that move, with markets also pricing in a further increase to 1.5% by the January meeting.
Middle‑East conflict and future outlook
Analysts note that the quarter coincided with heightened geopolitical tension in the Middle East, which could have weighed on growth. The fact that Japan still posted a solid expansion suggests resilience in the face of external shocks.
Looking ahead, the BOJ’s next policy decision will be closely watched for signs of how the central bank balances inflation pressures—exacerbated by global energy markets—and the need to support a still‑recovering domestic economy.
Original reporting: Appleton, WI News Feed (HLL/CB) — read the source article.
