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Japan's Q2 Growth Slows as Weak Consumption, Investment Weigh on Economy

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Japan's Q2 Growth Slows as Weak Consumption, Investment Weigh on Economy

Japan's economy expanded at an annualized 1.1% in the second quarter, slowing from 1.9% in the previous quarter, according to preliminary data from the Cabinet Office released Monday.

The reading missed the 2% market consensus forecast tracked by Investing.com. On a seasonally adjusted quarter-on-quarter basis, GDP grew 0.3%, after expanding 0.5% in the first quarter.

Growth was hampered by softer domestic demand, with private consumption falling 0.1% and private non-residential investment declining 1.2%.

Private residential investment fell 0.5%, while public investment declined 0.1%.

Net exports provided support, contributing 0.5 percentage points to quarterly GDP growth as exports rose 0.5% and imports fell 1.5%.

Despite the softer growth, investment is expected to remain resilient, particularly in areas linked to artificial intelligence and data centers.

"With regards to capital spending, our basic view is that investment remains solid, particularly in areas such as AI and data centers," Naoki Hattori, chief Japan economist at Mizuho Research Institute, was quoted as saying by Bloomberg.

Hattori said the September Bank of Japan rate hike remains the base case, pointing to the external environment following the coordinated yen intervention by Japan and the U.S.

The intervention came as Tokyo and Washington took joint action in the currency market to stem the yen's slide to 40-year lows.

It marked the first joint yen-buying action by the two countries since 2011, with the Japanese government buying yen for dollars and Bank of Japan data suggesting it sold as much as $58.97 billion to support the currency.

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