Japan’s GDP beat expectations in Q2‎

The Japanese economy grew much faster than expected in the second quarter of the year, as strong auto exports and a rebound in tourism helped offset a slowdown in post-corona consumption recovery.

According to Reuters, the quarterly growth rate was 1.5%, which is much higher than the average estimate of 0.8% in a Reuters poll.

This is the fastest pace of growth since the last quarter of 2020, and followed an average growth of 3.7% in the first quarter.

While the headline GDP data provides some comfort to policymakers seeking to balance economic growth with sustainable inflation, it masks underlying weakness in consumption.

Private consumption, which makes up more than half of the economy, fell 0.5% on a quarterly basis in the April-June period, as higher prices hit sales of food and home appliances.

Exports increased 3.2% in the second quarter, led by auto exports, while capital spending remained flat.

Japanese automakers benefited from a weaker yen, which helped support profits amid falling sales in China and a difficult transition to electric cars.

Strong demand in the United States and Europe also supported exports, while the boom in foreign tourists in the post-Corona period gave the economy a much-needed boost.

Increased external demand, or net exports, added 1.8 percentage points to growth in the second quarter, while weak domestic demand trimmed 0.3 percentage points from growth.

As such, the Central Bank will maintain the current monetary policy and will adopt a wait-and-see attitude for the time being.

Economy Minister Shigeyuki Goto said real wages increased for the first time in 7 quarters, and companies’ investment appetite was strong.

“Against this, we expect a moderate economic recovery to continue, despite the need to be cautious about downside risks from the global economy and the impact of rising prices,” he added.

The Bank of Japan took steps last month to allow long-term interest rates to rise further, a move analysts see as the beginning of a gradual shift away from massive monetary stimulus.