Japan’s GDP growth misses forecasts in Q2

Japan’s economy grew at a slower-than-expected pace in the second quarter, expanding just 0.2% quarter-on-quarter, official data showed. The reading fell short of forecasts for a 0.4% increase, signaling weaker-than-anticipated domestic demand.

Private consumption, a key driver of growth, rose 0.1% in the period, while business investment declined 0.1%, indicating cautious corporate spending. Government consumption also contributed modestly, increasing 0.3%. The data, adjusted for seasonal factors, reflects persistent softness in household spending despite policy support.

On an annualized basis, GDP growth slowed to 0.8%, down from a revised 3.3% in the prior quarter. The revision follows initial estimates that had suggested a stronger rebound. Analysts attributed the miss to weaker wage growth and subdued consumer confidence amid persistent inflation pressures.

The yen weakened modestly following the release, with USD/JPY trading near 150.20, as investors reassessed the Bank of Japan’s policy outlook. The central bank has maintained ultra-loose monetary conditions but faces growing scrutiny over its yield curve control framework amid rising inflation.

The data underscores challenges for policymakers in sustaining growth while managing inflationary risks. Economists expect further volatility in domestic demand as households and businesses navigate higher living costs and uncertain global conditions.