Japan revises Q2 GDP growth estimate to 1.4% annualized
Japan’s economy grew faster in April–June than previously estimated: GDP increased by 1.4% on an annualized basis, compared with the initial estimate of 1.1%. The revision was linked to a smaller-than-expected decline in corporate capital spending, Channel NewsAsia reports, citing data from Japan’s Cabinet Office.
Revised GDP figures
Without annualization, Japan’s GDP increased by 0.4% compared with the previous quarter. This matched economists’ median forecast and exceeded the previous growth estimate of 0.3%.
Capital spending fell by 0.9% in the second quarter. The initial estimate projected a decline of 1.2%, while economists expected a decrease of 0.8%.
Private consumption, which accounts for more than half of Japan’s economy, remained unchanged, as in the previous data. External demand, meaning the difference between exports and imports, added 0.5 percentage points to GDP growth. Domestic demand reduced the figure by 0.1 percentage points; its negative contribution was larger in the initial estimate.
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Expectations for the Bank of Japan’s rate
Daiwa Securities senior economist Kento Minami said the growth was notable given the possible negative impact of the situation in the Middle East. In his view, the economic data allow the Bank of Japan to continue raising rates.
Data released last week showed that Japanese companies increased spending on factories and equipment by 1.6% in the second quarter compared with the same period last year. Real wages rose by 2.4% year-on-year in July, the largest increase since May 2021 and the seventh consecutive month of growth.
In June, the Bank of Japan raised its key interest rate to 1%, the highest level in 31 years. According to broker Tokyo Tanshi, swap rates indicated a 98% probability of a 25-basis-point rate increase to 1.25% at the central bank’s September meeting.
