Japan’s economy rebounds strongly 3.1% YoY in Q2

Japan’s economy expanded by a surprising 3.1 per cent on an annualised basis in the second quarter, rebounding from a contraction in the first quarter, according to recent data published by the state’s Cabinet Office on Thursday.

The robust growth, driven by a surge in consumption, has strengthened expectations for further interest rate hikes by the Bank of Japan (BOJ).

The GDP data exceeded market expectations of a 2.1 per cent increase and followed a revised 2.3 per cent contraction in the first quarter. On a quarterly basis, the economy grew by 0.8 per cent, surpassing forecasts of a 0.5 per cent increase.

Private consumption, which accounts for over half of Japan’s economy, rose by 1.0 per cent, marking the first increase in five quarters. This rebound reflects improved consumer sentiment amid rising real wages.

The influx of tourists has also contributed to economic growth, with retail sales benefiting from increased spending by foreign visitors. The government expects tourism to generate 8 trillion yen ($54.74 billion) this year.

While the second-quarter data is positive, challenges remain. Capital spending, a key driver of growth, increased by only 0.9 per cent in the quarter. Moreover, external demand, or net exports, subtracted 0.1 percentage point from growth.

The Japanese yen traded around 147.38 to the dollar, showing little reaction to the GDP data. The Nikkei index rose 1.01 per cent during morning trading, buoyed by positive sentiment from Wall Street.

Attribution: Reuters, Japan’s Cabinet Office report

Subediting: Y.Yasser