Japan’s economy grows slower than expected in April-June

Japan's economy expanded at a slower pace than anticipated during the April-June period, according to official figures released on Monday. The annualized growth rate of the economy reached 1.1%, falling short of the median market estimate of 2.0% growth, as reported by Reuters. This growth marked the third consecutive quarter of expansion, with the previous quarter witnessing an upward revision to a 1.9% increase.

The annualized growth rate translates to a quarterly increase of 0.3%, which was below the median estimate of a 0.5% rise. Private consumption, a significant driver of Japan's economy, remained stagnant, failing to meet market expectations of a 0.5% increase. Capital spending, another crucial factor for private demand, declined by 1.2% in the second quarter, underperforming the market forecast of a 0.4% increase.

Net external demand, comprising exports minus imports, contributed 0.5 percentage points to the growth. Japanese exports continued to flourish due to robust US demand for hybrid vehicles and sustained global investment in artificial intelligence, particularly in semiconductor-related equipment and components. However, analysts cautioned that escalating import costs and mounting upstream price pressures could eventually impact consumers, posing a risk to spending later in the year.

Private consumption might also experience a slowdown during the July-September quarter, following policy and regulatory changes that temporarily bolstered demand for durable goods, such as automobiles and air conditioners, in the April-June period. A recent survey by the Japan Center for Economic Research indicated that 37 economists predicted annualized GDP growth to decelerate to an average of 0.05% in the upcoming quarter.