Japan: Q2 Growth Revised to 1.4% Annualized

Quarter-on-quarter, real GDP rose by 0.4%, after an initial estimate of 0.3%, according to Cabinet Office data. The revision confirms that activity continued to expand between April and June despite a tense international environment and still fragile domestic demand.

The main change concerns business investment, now estimated to have declined by 0.9% over the quarter, compared to a previously announced drop of 1.2%. This statistical improvement was enough to raise the overall growth rate.

Private consumption, which accounts for more than half of Japan’s economy, remained stable. Foreign trade contributed 0.5 percentage points to growth, while domestic demand subtracted 0.1 points, compared to a negative contribution of 0.2 points in the first estimate.

The new data are closely watched by markets ahead of the Bank of Japan’s next decision. The central bank raised its key interest rate to 1% in June, its highest level in 31 years, amid price pressures and yen weakness.

A modest but positive revision

The Cabinet Office had published on 17 August a first estimate showing a quarterly increase of 0.3% and annualized growth of 1.1%. The second estimate now raises these figures to 0.4% and 1.4%, respectively.

This growth follows a rebound in Japan’s economy over the previous year. In February, Bénin Web TV reported that Japan’s GDP had increased by 1.1% in 2025, according to government data.

The Bank of Japan under scrutiny

The revision comes as investors anticipate further monetary tightening. Reuters notes that markets widely expect a rate hike in September, while monitoring the impact of the Middle East conflict, previous rate increases, and yen movements on the economy.

Real wages adjusted for inflation also rose by 2.4% year-on-year in July, their strongest increase since May 2021 and the seventh consecutive monthly rise, according to data released Tuesday. This trend could support consumption if it continues.