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🇸🇬 Singapore /Economy & Trade

Japan upgrades Q2 GDP growth after smaller-than-first-estimated capital spending decline

From CNA · () English

Translated from English and summarized by DistantNews. Read the original for the full story.

At a glance

Newswire Documents & data Context piece
  • Japan revised second-quarter annualized GDP growth to 1.4% from an initial 1.1%, although the result remained below economists’ 1.6% median forecast.
  • Capital expenditure fell 0.9%, an improvement from the initial 1.2% decline, while private consumption remained flat and external demand added 0.5 percentage point.
  • Markets expect the Bank of Japan to raise its policy rate by 25 basis points to 1.25% at its September meeting.

Japan’s economy performed slightly better than first estimated in the April-to-June quarter, helped by a less severe decline in business investment. Revised Cabinet Office data put annualized growth at 1.4%, up from the preliminary 1.1% and just below economists’ 1.6% median forecast.

On a nonannualized basis, gross domestic product grew 0.4%, matching expectations and exceeding the initial 0.3% reading. Capital expenditure declined 0.9%, compared with the preliminary estimate of a 1.2% drop. The revised figure still represented a slightly sharper fall than economists had expected.

Private consumption, which accounts for more than half of the economy, was unchanged and matched the first estimate. External demand contributed 0.5 percentage point to growth, also unchanged from the preliminary data. Domestic demand reduced growth by 0.1 percentage point, a smaller drag than the initial 0.2 point.

Given that the April-June quarter was a period when the Middle East situation could have exerted downward pressure, the fact that growth ended up around this level is notable.

· Kento MinamiThe Daiwa Securities economist assessed the stronger-than-initially-estimated quarterly growth.

Kento Minami, a senior economist at Daiwa Securities, said the result was notable given the potential economic pressure from the situation in the Middle East during the quarter. He said the economy was not in a situation requiring concern and that the data allowed the Bank of Japan to proceed with rate increases.

Markets are closely watching the central bank’s decision next week. Swap rates indicated a 98% chance of a 25-basis-point increase to 1.25% in September, according to Tokyo Tanshi. Traders had also fully priced another increase to 1.5% by January. Separate data showed inflation-adjusted wages rose 2.4% in July from a year earlier, the biggest increase since May 2021 and the seventh straight monthly gain.

It is not at all a situation where we need to worry about the economy. That means the Bank of Japan can definitely move ahead with rate hikes.

· Kento MinamiThe economist linked the GDP revision to the case for further monetary tightening.
About this summary

Originally published by CNA in English. Translated, summarized, and contextualized automatically by DistantNews, with a note on how the source frames the story. Not individually reviewed before publishing. How this works.

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