On Thursday, figures showed that Japan’s economy grew at a faster-than-expected annual rate of 3.1% in the April-June period, marking a recovery from the previous quarter, thanks to a strong increase in consumption.
The data support the Bank of Japan’s forecast that a strong economic recovery will ensure inflation sustainably reaches the 2% target and that further rate hikes are justified.
The rise in gross domestic product (GDP) compared with a median market forecast of a gain of 2.1% and followed a revised 2.3% decline in the first quarter, government data showed. The reading translated into a quarterly increase of 0.8%, beating the 0.5% rise expected by economists in the Reuters poll.
Private consumption is a weak spot in the economy as households struggle with rising living costs, partly attributed to higher import prices due to the weak yen.
Private consumption, which accounts for more than half of economic output, rose 1.0%, compared with a forecast increase of 0.5%, the first increase in five quarters.
Capital spending, a key driver of private demand-driven growth, rose 0.9% in the second quarter, compared with a 0.9% increase seen by economists in the Reuters poll.
The data show that foreign demand, or exports minus imports, reduced growth by 0.1 percentage points.
The BOJ last month raised interest rates and unveiled a plan to scale back its massive bond purchases, a further step in winding down its massive monetary stimulus.
