Japan Economy Grows Annualized 1.9 Pct in April-June

August 10, 2018

Tokyo- The Japanese economy expanded at an annualized rate of 1.9 pct in April-June in price-adjusted real terms, marking the first growth in two quarters, government data showed Friday.

The growth was led by domestic demand, but analysts note uncertainty over the course of the economy.

"A pickup in personal consumption lacked vigor," said a senior official of the Cabinet Office, which released the data.

The annualized growth was higher than a median forecast of a 1.3 pct rise among 20 economic research institutes polled by Jiji Press.

While welcoming the positive growth in April-June, Economic and Fiscal Policy Minister Toshimitsu Motegi said in a statement that a close watch is needed for effects on the global economy from trade issues.

Japan's gross domestic product in April-June grew 0.5 pct from the previous quarter in real terms, the government agency said in a preliminary report.

Domestic demand pushed up the quarterly real GDP growth rate by 0.6 percentage point, while external demand cut the growth by 0.1 point.

In nominal terms, April-June GDP rose 0.4 pct for an annualized increase of 1.7 pct.

With the rate of nominal growth standing below that of real growth, the economy has yet to grow with price increases, the data showed.

In the first quarter of fiscal 2018, personal expenditures, which account for more than half of Japan's GDP, rebounded 0.7 pct from the previous quarter in real terms, following a 0.2 pct drop in January-March that stemmed mainly from a surge in vegetable prices. Although spending in the restaurant and services industries was sluggish, demand expanded for automobiles, television sets and refrigerators.

Corporate capital expenditures increased 1.3 pct, rising for the seventh straight quarter.

Reflecting solid business sentiment, investment grew at the production machinery, construction and construction machinery sectors. Spending on labor-saving equipment was also strong amid labor shortages.

Housing investment dropped 2.7 pct, contracting for the fourth consecutive quarter. Public investment slipped 0.1 pct.

Exports rose 0.2 pct, while imports grew 1.0 pct thanks chiefly to a rise in aircraft imports.

Export growth was weak partly because Nippon Yusen K.K. <9101> and two other major Japanese shipping companies integrated their container ship operations and moved the base of the business to Singapore.

Toru Suehiro, senior market economist at Mizuho Securities Co., said that although the real GDP growth in April-June was stronger than market forecasts, the rise represented temporary strength after a setback in the previous quarter.

"If concerns over trade war between the United States and China increase and exports slow down further, the Japanese economy may suffer weaker or even negative growth," Suehiro said. Jiji Press