Japan's Q1 economy grows faster than expected on strong consumer spending

Japan's economy expanded at a stronger rate in the fiscal first quarter than previously estimated, despite worries about US tariffs and domestic political uncertainty, according to government data released Monday.

The Cabinet Office said Japan's real gross domestic product, the sum value of a nation's goods and services, grew at a seasonally adjusted 2.2 per cent annualised rate in the April-June quarter from the previous quarter.

That was better than the preliminary estimate for 1.0 per cent growth, which came out last month, as solid consumer spending and inventories lifted growth more than previously thought.

Quarter-on-quarter, Japan's GDP grew 0.5 per cent, up from the initial estimate for a 0.3 per cent rise, which was also what analysts projected, according to RaboResearch.

 

That marked the fifth straight quarter of growth. The annualised number shows what the growth, or contraction, would have been if the quarterly rate continued for a year.

US President Donald Trump's move to raise tariffs on Japanese imports is a major worry for the export-dependent economy, especially auto exports, which now face a 15 per cent tariff, up from 2.5 per cent.

Another concern is the looming political uncertainty after Prime Minister Shigeru Ishiba announced Sunday he is stepping down as head of the ruling party. A party election will follow over the next weeks.

Private consumption rose 0.4 per cent, according to the latest government data, better than the initial estimate for 0.2 per cent growth, raising domestic demand growth into positive territory at 0.2 per cent growth, instead of contracting 0.1 per cent, as in the earlier data.

Japan's benchmark Nikkei rose in morning trading, despite Ishiba's announcement on resigning, as the move was somewhat expected, and the market appeared to welcome the action as a step forward.

But analysts say uncertainty remains because it's still unclear what parties might be brought in to form a coalition with the ruling party.