TOKYO: Japan’s economy likely expanded more than initially estimated in April-June thanks to solid business spending, a Reuters poll showed, but growth prospects in the current quarter and beyond may not be strong.
Revised real gross domestic product (GDP) data is expected to show the world’s third-largest economy grew at an annualised 2.9% rate in the second quarter, according to the poll of 19 economists.
The growth figure would be higher than a preliminary reading of expansion at a 2.2% annualised rate.
An expected 1.8% increase in capital expenditure, larger than the previously estimated 1.4% rise, would be the main driver of upgrade, analysts said.
A Ministry of Finance survey this week showed resilient corporate spending despite headwinds. Changes in GDP component data, such as capital expenditure, are not annualised.
The expected upward revision in Japan’s April-June GDP growth would be consistent with the already accepted view that the economy had benefited from a fall in COVID-19 infections, said Shinichiro Kobayashi, principal economist at Mitsubishi UFJ Research and Consulting.
But another virus outbreak in Japan since July, together with the relentless raw material inflation and a global economic slowdown, darken Japan’s outlook for the second half of this year.
Weakness of the yen, which hit a 24-year-low this week, could further harm the economy, some analysts have said.
Japan’s GDP expands in Q2 after Covid curbs lifted
“Downward pressure on Japan’s economy is inevitable to some extent,” said Yoshimasa Maruyama, chief market economist at SMBC Nikko Securities.
Still, the absence of government-imposed coronavirus curbs on service consumption and an easing supply bottlenecks for manufacturers provide relief, Maruyama said, adding he expected Japan to continue economic expansion into fiscal 2023.
Elsewhere in the poll, economists estimated Japan’s current account balance had returned to a surplus in July thanks to yen weakness boosting primary income - for example, dividends from abroad.
The June current account balance was the first deficit in five months.
The median estimate for July current account stands at a surplus of 713.5 billion yen ($5.09 billion).
Household spending in July was likely 4.2% higher than a year earlier but down 0.6% from a month before, the poll also showed.
The government will release the revised second-quarter GDP figures and the current account balance data at 8:50 a.m. on Sept. 8 (2350 GMT, Sept. 7).
Household spending data is due at 8:30 a.m. on Sept. 6 (2330 GMT, Sept. 5).
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