Japan’s economy expanded 0.3% quarter-on-quarter in the second quarter, missing market expectations of a 0.5% gain, preliminary government data showed on Wednesday.
The Cabinet Office reported the increase, driven by a modest rebound in services activity and inventory adjustments, though private consumption—a key driver of growth—remained subdued. Capital expenditure by businesses also softened, signaling cautious corporate sentiment amid persistent inflation and rising labor costs.
On an annualized basis, GDP rose 1.2%, below the 2.0% forecast in a Reuters poll. The data follows a revised 1.0% contraction in Q1, which was deeper than initially estimated.
Analysts attributed the weaker-than-expected performance to sustained pressure on household spending, despite wage growth outpacing inflation in recent months. Exports, a traditional pillar of Japan’s recovery, showed limited traction as global demand softened.
The yen’s recent depreciation, while supportive for exporters, has done little to offset broader domestic headwinds. Policymakers at the Bank of Japan have maintained a cautious stance, balancing the need for further monetary tightening against risks to fragile growth.
The data reinforces expectations that Japan’s recovery will remain uneven, with downside risks persisting in the second half of the year.
