Rising consumer spending propels Japan’s economy amid global uncertainties
Japan’s economy expanded faster than initially estimated in the second quarter. Annualized GDP growth came in at 2.2%, up from the preliminary forecast of 1.0%, while quarter-on-quarter growth rose to 0.5% from the earlier estimate of 0.3%. This growth was largely driven by stronger private consumption, higher inventories, and increased corporate spending. (Source: Reuters)
Private consumption, which accounts for more than half of Japan’s GDP, saw a modest uptick of 0.4%, revised from the earlier estimate of 0.2%. Restaurants, gaming, and corporate spending contributed significantly to this upward revision, reflecting robust domestic activity despite global uncertainties.
Capital expenditure, a key indicator of private demand, rose 0.6% in Q2, down from an initial estimate of 1.3%. Domestic demand contributed 0.2 percentage points to overall GDP growth, reversing a small drag of 0.1 percentage points seen in the preliminary reading.
External demand, calculated as exports minus imports, contributed 0.3 percentage points to growth, in line with earlier estimates. However, analysts caution that U.S. tariffs could slow export growth in the current quarter. A recent trade deal with the U.S., which lowered tariffs on Japanese automobiles and other products, offers some relief to the export-driven economy.
Political instability has risen following Prime Minister Shigeru Ishiba’s resignation, which could complicate policymaking. Tariff concerns and uncertainty may delay any imminent interest rate hikes by the Bank of Japan. Policymakers are now closely watching July–September GDP figures to assess how U.S. tariffs are affecting economic momentum.
Japan’s Q2 GDP growth exceeded expectations, driven by private consumption and corporate spending. Despite this positive momentum, political uncertainty and trade tensions with the U.S. pose risks for the coming quarter. The economy’s performance in July–September will be critical in guiding policy decisions and assessing export trends.
(Disclaimer: This slideshow has been sourced from Reuters)
