Weak Japan growth muddies waters for BoJ rate hike
The weaker-than-expected GDP came after capital expenditure fell and missed market expectations.
Tokyo: Japanese economic growth slowed unexpectedly in the second quarter, official figures released on Monday revealed, dampening prospects for the Bank of Japan to raise interest rates. Capital expenditure and consumption both fell, leading to a 0.3% growth rate on a month-to-month basis for April-June, compared to 0.5% growth in the previous period.
The annualized expansion was only 1.1%, lower than forecasts of 2.0% and 1.9% for January-March. The weaker-than-expected GDP growth came after a decline in capital expenditure and flat private consumption, failing to meet market expectations. The Bank of Japan had anticipated raising interest rates soon as inflation accelerated in the world's fourth-largest economy, but the latest data weakens the case for a September hike.
The currency has lost half of its gains after a joint intervention by the United States and Japan last month. Prime Minister Sanae Takaichi's expansionary fiscal policies, including a stimulus package and energy tax rebates, have eroded her popularity and raised concerns about Japan's public finances.
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