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Investing.com-- Japan’s economy grew more than expected in the April-June quarter, revised data showed on Monday, boosted by strong export volumes and steady growth in private consumption, which offset sluggish business spending.
Gross domestic product grew 0.5% quarter-on-quarter, higher than expectations of 0.3%. GDP surged 2.2% year-on-year, well above initial estimates of 1% while also accelerating sharply from the prior quarter.
The print was driven by outsized, albeit steady growth in private consumption, which grew 0.4% q-o-q against expectations of 0.2%.
Japanese exports were also seen remaining steady despite increased challenges from U.S. trade tariffs. Japan struck a late-July deal with the U.S. entailing lower tariffs on Tokyo’s key export sectors, chiefly automobiles and semiconductors.
Japanese companies now face a 15% flat tariff on exports to the United States. Government officials have warned that the tariffs will weigh on growth in the coming quarters, and could hurt capital investment.
Capital spending was a weak spot in Monday’s GDP reading, rising 0.6% q-o-q and coming well behind expectations of 1.6%.
Still, Monday’s data showed sustained strength in economic growth and private spending– trends that could give the Bank of Japan more headroom to hike interest rates.
But the central bank also has to contend with increased political uncertainty. Prime Minister Shigeru Ishiba announced his resignation on Sunday, after his ruling coalition suffered a harsh loss in a July election.
Ishiba signaled that he had held off from resigning until a U.S. trade deal was reached, with U.S. President Donald Trump having signed an order implementing the trade deal last week.