MNI BRIEF: Japan GDP Seen Slowing In Third Quarter

Bank of Japan officials expect the economy to slow in the third quarter but a moderate recovery to continue after net exports contributed to stronger-than-expected 6.0% annualised second-quarter growth, MNI understands.

The economy still faces headwinds from slowing global demand and Japan’s output gap is likely to remain negative for some time. Officials will also closely monitor private consumption, which decreased 0.5% q/q in Q2 largely as they expected, for signs that high prices are constraining purchases, as well as industrial production, which early data indicates is set to fall 1.4% q/q in the third quarter for the first drop in two quarters.

The data came after the BOJ further relaxed its yield curve control framework in July, raising the effective upper limit for the 10-year-yield to 1%, with some observers expecting further moves as soon as September if inflation indicators continue to improve. (See MNI INTERVIEW: BOJ Could Raise YCC Limit Again In 2023-Sekine)