Japan upgrades Q2 GDP on slight capex improvement

Japan's economy expanded at a faster rate than initially estimated in the April-June quarter, with gross domestic product (GDP) growing 1.4 percent annually, according to revised data released on Tuesday. This revision came as a surprise to economists who had initially forecasted a slower 1.1 percent growth. The upward adjustment was primarily driven by an improvement in business spending, which was less weak than initially thought.

Private consumption remained flat, while external demand contributed 0.5 percentage point to GDP growth, and domestic demand offset a slight drag of 0.1 percentage point. The stronger-than-expected performance in Q2 suggests a robust domestic demand, despite the potential downward pressure from the Middle East situation. The Bank of Japan may proceed with rate hikes, as the upward revision indicates a stronger economic outlook.