Japans Q2 GDP grows much faster than expected as exports zoom

Japan's economy expanded for a third straight quarter in April-June, as brisk auto exports and tourist arrivals helped offset the drag from a slowing post-COVID recovery in consumption, although global recession prospects cloud the outlook.

The 6.0 per cent annualised growth in Japan's gross domestic product (GDP) figure translated into a quarterly gain of 1.5 per cent, much bigger than median estimates of 0.8 per cent in a Reuters poll.

It followed a revised 3.7 per cent expansion in the first quarter, posting the fastest expansion since the final quarter of 2020.

The solid GDP data provides relief to policymakers who are seeking to balance economic growth with sustainable inflation and steady wage increases.

Marcel Thieliant, head of Asia-Pacific at Capital Economics, said the export-driven momentum in growth is unlikely to be sustained.

"And while capital goods exports bounced back in June as the largest falls in overseas investment are now behind us, we do not expect a vigorous recovery," Thieliant said.

By key sub-sectors, private consumption, which makes up more than half of the economy, fell 0.5 per cent quarter-on-quarter in the April-June period, as price hikes hit sales of food and household appliances.

Exports expanded 3.2 per cent in the second quarter led by car exports and inbound tourism, while capital expenditure was flat.

External demand, or net exports, added 1.8 percentage points to second quarter growth as imports declined for a third straight quarter, while domestic demand shaved off 0.3 of a percentage point.

The Bank of Japan took steps last month to allow long-term interest rates to rise more, a move seen by analysts as the beginning of a gradual shift away from massive monetary stimulus.