Japan Q2 GDP Growth Slows to 1.1% Annualised on Weak Spending
Japan's economy expanded at a slower 1.1 per cent annualised rate in the April-June quarter, government data shows. Weak household spending and business investment drove the slowdown, missing market forecasts.
Growth Decelerates
Japan's economy expanded at an annualised 1.1 per cent in the April-June quarter, government data revealed on Monday. This figure fell below market expectations, which a Reuters poll had placed at 2.0 per cent. It also marked a deceleration from the upwardly revised 1.9 per cent expansion recorded in the preceding quarter.
The quarterly rise stood at 0.3 per cent, short of the 0.5 per cent median estimate. Kazutaka Maeda, a senior economist at Meiji Yasuda Research Institute, noted that while growth was positive, underlying details appeared weaker than anticipated.
Domestic Demand Weakens
Weak domestic demand primarily contributed to the slower growth. Private consumption, which constitutes over half of Japan's economic output, remained flat. This missed a market estimate for a 0.5 per cent increase. Capital spending, a vital component of private demand, contracted by 1.2 per cent in the second quarter.
This contrasted sharply with market forecasts predicting a 0.4 per cent rise. Strong exports partially mitigated these domestic weaknesses, with net external demand (exports minus imports) adding 0.5 percentage point to overall growth.
Underlying Factors
Factors such as tuition-free education measures and higher tobacco prices affected household spending, according to the data. Yoshiki Shinke, senior executive economist at Dai-ichi Life Research Institute, attributed some consumption weakness to one-off factors, including a shift in spending towards government initiatives like free school lunches.
He suggested that a decline in capital spending might reflect disruptions from the Middle East conflict, though these factors are now easing. Despite the slowdown, corporate investment plans remain firm, and the economy has shown resilience, Shinke added.
Looking ahead, rising import costs and upstream price pressures could affect consumers later this year. This might curb spending. Private consumption could also pull back in the July-September quarter, as temporary boosts to durable goods demand from policy changes in Q2 fade.
A Japan Center for Economic Research survey of 37 economists forecasts annualised GDP growth to slow further to an average 0.05 per cent in the third quarter. The Bank of Japan (BOJ) closely watches consumption and wage trends to guide future interest rate decisions. A September rate hike remains widely expected.
This article is journalism, not investment advice; consult a licensed professional before making financial decisions. Market data is indicative, may be delayed, and should be verified with your broker or exchange before use.
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