Japan’s Q2 GDP growth was revised up to 1.4%, helped by stronger-than-estimated business investment
Japan’s economy expanded at an annualised 1.4 per cent in the April-June quarter, beating its initial estimate as a smaller decline in business investment provided a boost to growth.
The revised figure released by Japan’s Cabinet Office on Tuesday was up from the preliminary estimate of 1.1 per cent. Economists had expected the economy to grow at an annualised 1.6 per cent in the second quarter.
On a quarter-on-quarter basis, Japan’s gross domestic product grew 0.4 per cent, matching the median forecast and exceeding the initial estimate of 0.3 per cent, Reuters reported.
Business investment less weak
The main change in the revised figures came from corporate capital spending. Business investment fell 0.9 per cent in the second quarter, compared with the initial estimate of a 1.2 per cent decline. The revision provided a lift to the overall GDP reading.
The data reflects stronger corporate spending on plant and equipment than initially captured. Separate data released last week showed Japanese companies increased spending on plant and equipment by 1.6 per cent from a year earlier in the April-June quarter.
Private consumption, which accounts for more than half of Japan’s economy, was unchanged from the preliminary reading.
External demand remained a significant support for growth. Net exports, or exports minus imports, contributed 0.5 percentage point to GDP growth, unchanged from the initial estimate.
More from BusinessDomestic demand, meanwhile, reduced growth by 0.1 percentage point. That was a smaller drag than the 0.2 percentage point decline estimated previously.
BOJ rate decision in focus
The revised GDP figures come ahead of the Bank of Japan’s next policy meeting, with investors closely watching whether the central bank will raise interest rates again.
Markets have been pricing in a strong probability of a rate hike this month. A firmer economic reading, alongside stronger wage growth, could add to the case for further monetary tightening.
Japan’s inflation-adjusted real wages rose 2.4 per cent in July from a year earlier, marking their biggest increase since May 2021 and extending the streak of annual gains to seven months, according to data released on Tuesday.
The BOJ raised its policy rate to 1 per cent in June, its highest level in decades. Policymakers are now assessing whether economic conditions can withstand another increase in borrowing costs.
Growth outlook remains mixed
The latest figures provide a somewhat stronger picture of Japan’s economy, but they also highlight uneven domestic demand.
Corporate investment has shown resilience, while household spending remains subdued. External demand has also provided support to overall growth.
The outlook is further complicated by geopolitical tensions and higher energy costs, which could affect inflation and household purchasing power.
A weaker yen is another consideration for the BOJ. While it can support exporters, it also increases the cost of imported goods and energy, adding to inflationary pressures.
