Anika Begay
By Makiko Yamazaki and Satoshi Sugiyama
TOKYO (Reuters) – Japan’s economy expanded at a faster-than-expected annualized pace of 3.1% in the April-June period, data showed on Thursday, rebounding from the previous quarter on a solid recovery in consumption.
The data confirms the Bank of Japan’s forecast that a solid economic recovery will help inflation sustainably reach its 2% target and justify a further increase in interest rates.
Government data showed that the increase in gross domestic product (GDP) was above the average market forecast of a 2.1% increase and followed a revised 2.3% slump in the first quarter.
The reading translates to a quarterly increase of 0.8%, beating the 0.5% increase forecast by economists in a Reuters poll.
Private consumption was a weak point in the economy, as households faced rising living costs, partly due to higher import prices caused by the weak yen.
Private consumption, which accounts for more than half of economic output, rose 1.0%, compared with a forecast of a 0.5% increase and its first gain in five quarters.
Capital spending, a key driver of private demand-led growth, rose 0.9 percent in the second quarter, compared with a 0.9 percent increase economists saw in a Reuters poll.
The data showed that external demand, or exports minus imports, reduced growth by 0.1 percentage points.
The Bank of Japan (BOJ) raised interest rates last month and detailed a plan to gradually reduce its massive bond-buying program, in another step toward phasing out its massive monetary stimulus.
