Japan raises second quarter GDP growth rate, with consumer spending recovery as the main driver

According to the Zhitong Finance APP, driven by adjustments in private consumption and inventory data, Japan's economic growth rate for the second quarter has been significantly upgraded compared to the initial estimate. This performance provides some confidence support for policymakers in addressing political and trade uncertainties. The Cabinet Office of Japan released revised data on Monday, showing that Japan's Gross Domestic Product (GDP) grew at an annualized quarter-on-quarter rate of 2.2% in the three months ending June 30, which not only exceeds the initial value of 1.0% announced on August 15 but also surpasses the median expectations of economists.

Although the data indicates that the world's fourth-largest economy has achieved strong growth, the future months of policymaking may face more challenges against the backdrop of U.S. tariff pressures and increasing political uncertainty (Japanese Prime Minister Shigeru Ishiba resigned on Sunday).

In terms of quarter-on-quarter growth, the GDP growth for the second quarter was 0.5%, higher than the initial estimate of 0.3% and the median expectations of economists.

The Cabinet Office stated that the data revision was mainly due to improvements in dining consumption, game sales, and corporate spending—these data were not fully captured during the initial accounting and therefore were not included in the first report.

As a core pillar of the Japanese economy (accounting for over 50%), private consumption was revised to a quarter-on-quarter increase of 0.4%, higher than the initial report's 0.2%.

However, analysts warn that the tariff policies introduced by U.S. President Donald Trump may lead to a significant slowdown in Japanese exports this quarter, thereby weakening the current economic growth momentum.

Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research and Consulting, pointed out: "It is expected that consumer spending in the July-September quarter will struggle to maintain sufficiently strong growth to offset the negative impact of declining exports."

Uichiro Nozaki, an economist at Nomura Securities, stated that although the revised data released on Monday is unlikely to affect the Bank of Japan's recent policy review, concerns over tariffs and political uncertainty may delay any potential interest rate hike plans.

Currently, market focus has shifted to the GDP data for the July-September quarter to assess the actual impact of U.S. tariffs on the Japanese economy.

It is worth noting that Japan and the U.S. officially finalized a trade agreement last week, implementing the "reduction of import tariffs on Japanese automobiles and other products" measures announced in July, which provides some breathing space for Japan's export-dependent economy.

As a key indicator of private demand, the GDP capital expenditure component (business investment) grew at a quarter-on-quarter rate of 0.6% in the second quarter, lower than the initial report's 1.3% and also below economists' previous expectations of 1.2%.

The contribution rate of external demand (exports minus imports) to the GDP growth in the second quarter was 0.3 percentage points, unchanged from the initial value; the contribution rate of internal demand was 0.2 percentage points, reversing the initial report's drag effect of 0.1 percentage points