Japan GDP grew 0.4% qoq in Q2, well above expectation of 0.1% qoq. Annualize growth rate slowed from 2.8% to 1.8%, but beat expectation of 0.5%. Looking at some details, private consumption, which accounts for around 60% of GDP, grew 0.6% qoq. Capital expenditure was solid and grew 1.5% qoq, accelerated from 0.4% qoq in Q1. Exports were weak but contracted just 0.1% qoq.
The set of data argues that uncertainty from global trade war has relatively controlled impacts on the economy. In particular, companies were not prompted to rein in investment spending. This echoed BoJ’s assessment that global uncertainties had so far limited impact on the Japanese economy. Though, domestic demand would weaken ahead later in the year due to the planned sales tax hike. That’s something BoJ policymakers need to continue to monitor.
