Japan’s GDP Growth Lifts With Consumer Growth And Capital Expenditure

The Japanese economy is growing better than expected.

The preliminary data provided by the Japanese government shows better GDP figures than expected.

On Friday, the Cabinet Office has reported good gross domestic product data for the quarter of April to June. Growth has come from solid private sector spending and through government investments. Private consumption has increased by 0.6 percent, while capital expenditure has increased by 1.5 percent against the previous quarter.

GDP shows an annualized 1.8 percent growth for the three months ending June. This is the third consecutive quarter expansion. The median forecast was a 0.4 growth.

This will provide a reason for Prime Minister Shinzo Abe to go ahead with the consumption tax sometime this year. He is planning on raising the tax to 10 percent from 8 percent.

Despite the trade war between the U.S. and China, the economy of Japan has shown growth. Japan is vulnerable to global pressure as it depends on other countries for its exports. Trade protectionism may impact growth felt analysts. However, Japan was able to show expansion in its economy.

Japan faces stiff labor shortage but has still managed to provide strong capital spending. There is, however, a regional slowdown and the export sector is still fragile. Japan has to grow despite its labor shortage, and this has encouraged corporate investments.

Consumption and capital expenditure are the main engines for the Japanese economy, says Kathy Matsui, the chief strategist at Goldman Sachs.

Bank of Japan may go a bit easy on further monetary policy, say analysts. The global central banks have been on massive rate cuts to stimulate their own economies and protect them from the global slowdown.

Japan’s Nikkei saw a gain of 0.44 percent gaining 225 points on Friday. The Topix index saw an increase of 0.35 percent.

The Japanese yen was trading against the dollar at 105.92, after reaching highs of 105.71.