Japan's economy grows annualized real 1.1% in April-June

Japan's economy expanded at an annualized real rate of 1.1% in the April-June quarter, marking a third consecutive quarter of growth, according to the Cabinet Office. This expansion was driven by increased government spending to address rising prices, although private consumption fell short of expectations, casting uncertainty on the economic outlook.

Gross domestic product adjusted for inflation rose 0.3% from the previous quarter, with government consumption contributing 1.6% to the growth, thanks to expanded subsidy programs. However, private consumption declined by 0.02%, marking the first decline in eight quarters. This was attributed to consumers no longer needing to spend on school and meal fees due to the government program, and a tax increase on heated tobacco products dampening demand.

Business investment contracted by 1.2%, partly due to reduced software orders. Exports increased by 0.5%, while imports fell by 1.5%, partly due to the closure of the Strait of Hormuz caused by the Middle East conflict, which affected crude oil shipments. Analysts noted that the depreciation of the yen, driven by the ongoing U.S.-Israeli war with Iran, would raise import costs for Japan's resource-poor economy.

Consumer sentiment remained cautious amid concerns about future price hikes, with wages rising for the sixth consecutive month but consumers hesitant due to potential price increases. The Bank of Japan's potential September rate hike was met with skepticism from economist Takeshi Minami, who highlighted the economic risks. Nominal GDP grew by 1.2% from the previous period, at an annualized rate of 4.8%.