Japan’s economy expanded in the second quarter at a pace slightly slower than the government’s initial estimate, while still advancing enough to keep the Bank of Japan (BOJ) on track to raise interest rates later this year.
Japan’s GDP grew at an annualized pace of 2.9 percent in the three months through June compared with the previous quarter, the Japanese Cabinet Office said yesterday.
The result compared with a preliminary estimate of 3.1 percent. Private consumption and capital investment were both revised a tad lower.
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In non-inflation adjusted terms, the economy advanced 1.8 percent from the previous quarter, and the data reaffirmed that the total value of the economy exceeded ￥600 trillion (US$4.18 trillion) for the first time on record, a goal set a decade ago by policymakers.
While the key domestic demand components were slightly downgraded, the overall results broadly support BOJ Governor Kazuo Ueda’s view that a gradual recovery would continue.
The central bank would conclude its next policy meeting on Friday next week, with the focus likely to fall on the prospects for another rate increase next month or in December after the latest hike to 0.25 percent in July.
Yesterday’s data confirmed that consumer spending grew 0.9 percent from the previous quarter in a sign of a recovery after it fell for four consecutive quarters through the end of March.
Concerns over cost of living and consumer demand would be on the minds of politicians vying to become Japan’s next prime minister. The ruling Liberal Democratic Party’s (LDP) Sept. 27 leadership election is all but certain to determine Japanese Prime Minister Fumio Kishida’s successor due to the party’s dominance in parliament.
LDP Secretary-General Toshimitsu Motegi, one of several candidates running in the party race, last week said he would compile an economic package if he wins the vote.
Shinjiro Koizumi, one of the frontrunners in the leadership race, has also pledged to unveil a package should he become prime minister.
With the likelihood that demand from China and the US might cool as economic growth slows, Japan’s consumer spending would be critical going forward, Norinchukin Research Institute chief economist Takeshi Minami said.
“Consumer spending may get stronger as wages are starting to rise,” he said. “At the same time, a recent rise in prices for rice and food may keep households in a saving mode.”
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