Japan second quarter GDP blows past expectations on domestic demand

TOKYO: Japan’s economy expanded at the fastest pace in more than two years in the second quarter as consumer and company spending picked up, highlighting a long-awaited bounce in domestic demand.

The world’s third-largest economy expanded by a much stronger-than-expected annualised rate of 4.0 per cent in April-June, posting its longest uninterrupted run of growth in a decade, government data showed on Monday.

Activity is expected to continue to improve in coming quarters, offering the Bank of Japan (BoJ) hope that a tight labour market is finally starting to boost wages and consumer spending, which in turn should make it easier to generate sustained inflation.

The rosy data was also a vindication for Japanese Prime Minister Shinzo Abe’s government, which has faced criticism that its economic agenda has not done enough to revive the country’s fortunes.

“The engines of consumer spending and capital expenditure both fired well in the second quarter, and that’s why domestic demand was so

strong,” said Hidenobu Tokuda, senior economist at Mizuho Research Institute.

“The pace of growth may moderate slightly, but we are still in recovery mode. This is a positive development for inflation.”

Gross domestic product expanded an annualised 4.0 per cent in April-June, government data showed, more than the median estimate for 2.5 per cent annualised growth and the biggest increase since January-March 2015.

Compared to the previous quarter, the economy expanded 1.0 per cent, versus the median estimate for 0.6 per cent growth.

Japan’s growth had been largely reliant on robust exports earlier in the year, though there were signs private consumption was picking up.

Annualised GDP for previous quarter was revised up to a 1.5 per cent increase, while quarterly real (inflation adjusted) GDP was revised up to 0.4 per cent growth from a 0.3 per cent increase.

The economy grew for six straight quarters in April-June. The last time the economy had a run of six consecutive quarters of growth was January-March 2005 through April-June 2006.

Private consumption, which accounts for about two-thirds of GDP, rose 0.9 per cent from the previous quarter, more than the median estimate of 0.5 per cent growth.

— Reuters