| Consensus | Consensus Range | Previous | |
| Quarter over Quarter | 0.6% | 0.4% to 0.7% | 0.5% |
| Annual Rate | 2.3% | 1.6% to 2.9% | 1.8% |
| Year over Year | 0.7% | 0.2% to 1.3% | 0.4% |
Market Consensus Before Announcement
Japan’s real gross domestic product is expected to grow for a third consecutive quarter in the April-June period, driven by steady private consumption and solid corporate capital spending, while ongoing geopolitical uncertainties in the Middle East have pushed up energy and other commodity prices, weighing on exports and limiting their contribution to overall economic growth.
Still, economic activity is expected to remain generally positive, with public investment also seen continuing to grow and helping sustain domestic demand. Preliminary real GDP is forecast to rise 0.6 percent on the quarter in the April-June period, or an annualized 2.3 percent, accelerating from a 0.5 percent quarter-on-quarter increase, or an annualized 1.8 percent, in January-March. This would mark a third straight quarter of growth.
Solid private consumption
Private consumption, which accounts for more than half of domestic output, is expected to extend its growth streak to sixth consecutive quarters in the second quarter, rising 0.5 percent on the quarter after a 0.3 percent increase in January-March. Real household income remained in positive territory during the period, while food price increases appear to have peaked, supporting private consumption.
Purchases of automobiles appeared to have increased, along with solid demand for durable goods, primarily due to demand for air conditioners ahead of tougher energy-efficiency standards set by the government to take effect from April 2027.
The recent outcome of the consumption trend index (CTI) for households also indicated resilient consumer spending, with the CTI for households with two or more people rising 0.5 percent on quarter in real terms in April-June, after increasing 0.7 percent in January-March and slumping 3.2 percent in October-December.
Limited impact from geopolitical tensions
GDP is expected to be supported by capital spending, which is forecast to rebound with a 0.4 percent increase after falling 0.7 percent in the first quarter. Healthy corporate earnings and the solid trend in industrial production are expected to keep capital expenditure on an upward trend.
Capital spending, as well as private consumption, was supported as the impact of the Middle East crisis was less severe than initially feared, helping keep GDP in positive territory. U.S. and Israeli attacks on Iran in late February led Iran to close the Strait of Hormuz, driving up energy, chemical and other commodity prices and intensifying concerns over material supplies.
Still, geopolitical tensions remain unresolved, raising concerns that they could restrain trading activity and limit gains in exports. Exports, measured by their contribution to GDP growth, are seen contributing 0.3 percentage point in the April-June period, unchanged from the previous quarter.
Public investment is seen growing for a second straight quarter, rising 0.6 percent after a 1.5 percent increase in the first quarter.
Consensus forecasts for key components are quarter-over-quarter percentage changes except for domestic demand, private inventories and net exports, which are measured by their contribution to GDP growth in percentage points. Figures for the previous quarter are shown in parentheses.
GDP q/q: +0.6% (+0.5%); 3rd straight rise
GDP annualized: +2.3% (+1.8%); 3rd straight rise
GDP y/y: +0.7% (+0.4%); 8th straight rise
Domestic demand: +0.3 point (+0.2 point); 3rd straight rise
Private consumption: +0.5% (+0.3%); 6th straight rise
Business investment: +0.4% (-0.7%); 1st rise in 2 qtrs
Public investment: +0.6% (+1.5%); 2nd straight rise
Private inventories: +0.0 point (-0.1 point); 1st rise in 5 qtrs
Net exports (external demand): +0.3 point (+0.3 point), 2nd straight rise
Definition
Gross Domestic Product (GDP) is the broadest measure of aggregate economic activity and encompasses every sector of the economy.
Description
Gross domestic product is the all-inclusive measure of economic activity. Investors need to closely track the economy because it usually dictates how investments will perform. Investors in the stock market like to see healthy economic growth because robust business activity translates to higher corporate profits. Bond investors are more highly sensitive to inflation and robust economic activity could potentially pave the road to inflation. By tracking economic data such as GDP, investors will know what the economic backdrop is for these markets and their portfolios.
The GDP report contains a treasure-trove of information which not only paints an image of the overall economy, but tells investors about important trends within the big picture. GDP components such as consumer spending, business and residential investment, and price (inflation) indexes illuminate the economy's undercurrents, which can translate to investment opportunities and guidance in managing a portfolio.