Japanese economy rebounds making case for rate hike

Strong rise in private consumption fuels better than expected 3.1% expansion in Q2

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Japan's economy expanded by a much faster than expected 3.1 per cent year on year in the second quarter, rebounding from a slump at the start of 2024, thanks to a strong rise in consumption and backing the case for another nearterm interest rate hike.

The Bank of Japan (BOJ) had forecast that a solid economic recovery would help inflation sustainably hit its 2 per cent target, and justify raising interest rates further after it hiked them in July in its continued quest to exit years of massive monetary stimulus.

The increase in gross domestic product compared with a median market forecast for a 2.1 per cent gain, and followed an upwardly revised 2.3 per cent contraction in the first quarter, government data showed on Aug 15.

The reading translates to a quarter-on-quarter rise of 0.8 per cent, beating a 0.5 per cent increase expected by economists in a Reuters poll.