Japan posts unexpectedly strong GDP

Japan’s economy grew much faster than expected in the second quarter as export volumes held up well against new US tariffs, giving the central bank some of the conditions it needs to resume interest rate hikes this year.

- MAKIKO YAMAZAKI KANTARO KOMIYA

Gross domestic product (GDP) rose 1.0% on an annualised basis, government data showed yesterday, marking the fifth straight quarter of expansion after the previous quarter's contraction was revised to growth.

However, analysts warn global economic uncertainties fuelled by US tariffs could weigh on the world’s fourth-largest economy in the coming months, especially as automakers struggle to keep prices down for American customers.

“The April-June data masked the real effect of Trump's tariffs,” said Takumi Tsunoda, senior economist at Shinkin Central Bank Research Institute. “Exports were strong thanks to solid car shipment volumes and last-minute demand from Asian tech manufacturers ahead of some sectoral tariffs. But these aren’t sustainable at all.”

The increase in GDP was helped by surprisingly resilient exports and capital expenditure and compared with median market expectations for a 0.4% gain in a Reuters poll. It followed a 0.6% rise in the previous quarter, which was revised up from a 0.2% contraction.