Japan expected to announce second quarter GDP growth

The April-June growth was the sharpest since the January-March period of 2015 and picked up speed from the 1.5 percent increase in the first quarter of this year.

The Bank of Japan said in July it expected the economy to expand 1.8% for the current financial year through March 2018, upgraded from the 1.6% growth estimated in April.

The Japanese economy has recorded its longest economic expansion in more than a decade after official data showed that it grew at 1% in the last quarter.

Figures published by the Japanese government today pointed to the sixth consecutive quarter of GDP growth, a positive streak last experienced from early 2005 to mid-2006.

Private consumption adjusted for inflation, which accounts for about 57 per cent of real GDP, gained 0.9 per cent from the first quarter.

Capital expenditure jumped by 2.4 percent in April-June from the previous quarter, doubling the median estimate for a 1.2 percent increase.

Japan's GDP in the II quarter increased by 4% compared to the same period a year ago, according to preliminary data of the government. Combined with the 5.1 percent rise in public works spending and 1.5 percent growth in housing investments, domestic demand pushed up the economy by 1.3 percent.

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The minister, however, conceded that private consumption has yet to fully recover.

"That makes Japan the fastest- growing economy in the G-7 this quarter by our reckoning and may restart the chatter about the BOJ's eventual quantitative and qualitative easing exit strategy", said Mr Rob Carnell, chief economist for Asia at ING in Singapore.

Inflation has lagged behind growth, even amid the tightest labour market in decades.

"Although the headline numbers were good, consumption still lacked strength", Toshimitsu Motegi, minister for economic and fiscal policy minister, said at a press conference. It's far from clear whether we're seeing a robust recovery in consumer demand.

He added: "What is needed is supply-side reform".

External demand subtracted 0.3 percentage point from GDP growth in April-June in part due to an increase in imports.

Despite the impressive report, Japanese markets are largely unchanged following the release of the report, reflecting that the outlook for inflation, rather than where growth has been, remains the key driver for monetary policy settings from the Bank of Japan. This is notable because Japan usually relies on exports to drive growth.

  • Sonia Alvarado