Q2 GDP Better Than Forecast As Domestic Demand Rebounds

Japan Q2 GDP was better than forecast. In q/q terms we rose 0.8%, which was the strongest rise since Q1 in 2023. It ends a soft run of growth outcomes seen since Q3 last year (-1.0%q/q, Q4 +0.1%q/q and Q1 this year, -0.60% q/q). In annualized terms we rose 3.1% q/q, versus a 2.3% forecast.

• The detail of the print looks solid as well. Consumption rose 1.0% q/q, against a 0.6% forecast (Q1 consumption fell -0.6%). Business spending was up 0.9%q/q against a 0.8% forecast and -0.4% in Q1.
• Domestic demand was up 0.9% q/q in Q2, after declining in each of the past 3 quarters. All sub components contributed positively to this backdrop.
• Net exports and inventories both trimmed -0.1ppts off growth, which was in line with market expectations.
• Nominal GDP was up 1.8%q/q, versus 1.2% projected.
• This supports the recent BoJ decision to hike rates and taper its bond buying program. Focus into H2 will be on consumption, with the authorities hopeful rising wages aids further gains and that this boosts broader economic activity.