| Consensus | Consensus Range | Actual | Previous | |
| Quarter over Quarter | 0.4% | 0.3% to 0.7% | 0.4% | 0.3% |
| Annual Rate | 1.6% | 1.3% to 2.7% | 1.4% | 1.1% |
| Year over Year | 0.9% | 0.8% to 0.9% | 0.9% | 0.7% |
Highlights
Japan’s GDP growth in the April-June quarter was revised up slightly in the second reading as private consumption turned out to be a tad firmer than initially estimated. The decline in business investment in equipment and software was smaller than in the preliminary report but its negative contribution to overall growth was unrevised. Public works spending fell more sharply than initially believed but its effect was also unrevised.
The gross domestic product grew 0.4% on quarter, or an annualized rate of 1.4%, compared to the initial reading of a 0.3% gain, or 1.1% annualized. The median economist forecast was +0.4% q/q and +1.6% annualized.
As the preliminary data showed last month, the economy posted its third straight quarterly expansion, led by external demand (exports minus imports), which lifted total domestic output by an unrevised 0.5 percentage point. It is largely due to a plunge in imports after the blockade of the Strait of Hormuz led to a sharp decline in crude oil shipped from the Mideast Gulf. Exports showed some resilience as the auto and steel industries had weather the initial impact of stiff U.S. tariffs.
The contribution of domestic demand was -0.1 percentage point, only slightly firmer than the preliminary estimate of -0.2 point. The decline in capital investment was a smaller 0.9% on quarter (consensus -0.8%), revised up from a 1.2% drop. It trimmed Q2 GDP by 0.2 point, unrevised from the initial reading. The positive contribution of private inventories was also unrevised at +0.3 point (consensus +0.4 point).
Private consumption, which accounts for about 55% of the total domestic output, was flat but up 0.0% on quarter, revised up from a 0.0% drop (figures are rounded). It barely made its sixth straight quarterly gain after showing a revised 0.4% gain in Q1.
In its monthly economic report for August, the Cabinet Office downplayed the weak Q2 GDP data. It said lower school lunch fees that households paid contributed to the slight drop in private consumption but that it was offset by higher government spending on school lunches. It also noted that a transfer of large-scale patent rights overseas resulted in lower capital spending at home but that was counted as an increase in exports.
Key components are quarter-on-quarter percentage changes except for domestic demand, private inventories and net exports, whose contributions are in percentage points. Preliminary figures are in parentheses.
GDP q/q: +0.4% (+0.3%); 3rd straight rise
GDP annualized: +1.4% (+1.1%); 3rd straight rise
GDP y/y: +0.9% (+0.7%); 8th straight rise
Domestic demand: -0.1 point (-0.2 point); 1st drop in 3 qtrs
Private consumption: +0.0% (-0.0%); 6th straight rise
Business investment: -0.9% (-1.2%); 2nd straight drop
Public investment: -0.5% (-0.1%); 1st drop in 2 qtrs
Private inventories: +0.3 point (+0.3 point); 1st rise in 5 qtrs
Net exports (external demand): +0.5 point (+0.5 point), 3rd straight rise
Market Consensus Before Announcement
Japan’s gross domestic product for the April-June quarter is expected to be revised up slightly, driven by an improvement in corporate spending after the initial reading showed a much sharper-than-expected decline, while private consumption remained weak and public investment revised down from the preliminary reading.
The underlying economy is expected to remain resilient, with real GDP projected to grow for a third consecutive quarter despite strong headwinds. Geopolitical tensions in the Middle East and the yen’s weakness pushed up import costs, while the government managed to contain gains in energy prices by providing subsidies and taking measures to release strategic oil reserves.
Japanese corporations have also benefited from persistent global demand related to artificial intelligence, including the construction of data centers around the world, providing a solid footing for the economy.
Real capital investment is expected to be revised up to a 0.8 percent decline on the quarter in the April-June period from a 1.2 percent decline in the preliminary reading released on Aug. 17. This is seen as one of the reasons for the expected upward revision in second-quarter GDP growth to 0.4 percent on the quarter from the initial reading of 0.3 percent.
On an annualized basis, the economy is seen being revised up to a 1.6 percent increase from the preliminary reading of 1.1 percent, while slowing from the 2.1 percent gain in the previous quarter. Compared with a year earlier, GDP is projected to expand 0.9 percent, up from the preliminary result of a 0.7 percent increase.
Revised private consumption is expected to be little changed at a 0.0 percent decline from the preliminary reading. The marginal drop came as a surprise as consumption fell from a 0.5 percent increase in the first quarter. Private consumption, which accounts for about 55 percent of GDP, also dipped into negative territory for the first time in eight months.
Consumption appeared to have been affected by legislation implemented from the new fiscal year in April to expand the program to make high school tuition free. Income restrictions on high school students were abolished nationwide, including for students attending private schools. In addition, higher cigarette prices from April could have affected consumption.
A steady increase in inflation across a wider range of items could continue to restrain consumer sentiment and weigh on private consumption, but household demand is expected to be supported by steady wage increases, with signs that the domestic labor market remains healthy, which could help support consumer confidence.
Revised public investment is expected to worsen from the initial outcome, falling 0.6 percent from the initial 0.1 percent decline. This would mark a sharp contraction after rising 1.5% in the January-March quarter.
Elsewhere, the revised second-quarter results are largely expected to be little changed or show a slight improvement from the preliminary figures released about three weeks ago.
Domestic demand is expected to have contributed 0.0 percentage point to overall GDP growth, upwardly revised from a 0.2-point decline in the preliminary data. Private inventories are expected to be revised up to a 0.4-percentage-point contribution from 0.3 point in the initial reading.
Consensus forecasts are shown as quarter-on-quarter percentage changes, except for domestic demand, private inventories and net exports, which are expressed in percentage-point contributions. Preliminary figures are in parentheses.
GDP q/q: +0.4% (+0.3%); 3rd straight rise
GDP annualized: +1.6% (+1.1%); 3rd straight rise
GDP y/y: +0.9% (+0.7%); 8th straight rise
Domestic demand: 0.0 point (-0.2 point); flat after 2nd straight rise
Private consumption: -0.0% (-0.0%); 1st drop in 8 qtrs
Business investment: -0.8% (-1.2%); 2nd straight drop
Public investment: -0.6% (-0.1%); 1st drop in 2 qtrs
Private inventories: +0.4 point (+0.3 point); 1st rise in 5 qtrs
Net exports (external demand): +0.5 point (+0.5 point), 3rd straight rise
Details:
Japan Q2 revised real GDP +0.4% q/q vs. prelim +0.3%; median economist forecast +0.4%
Japan Q2 revised real GDP +1.4% annualized vs. prelim +1.1%; median forecast +1.6%
Japan Q2 revised real GDP +0.9% y/y vs. prelim +0.7%; median forecast +0.9%
Japan Q2 revised GDP up as private consumption turns out to be slightly firmer than initially estimated
Japan Q2 revised GDP: domestic demand contribution -0.1 pct point vs. prelim -0.2 point; median forecast +0.0 point
Japan Q2 revised GDP: capex contribution -0.2 pct point vs. prelim -0.2 point
Japan Q2 revised GDP: private consumption contribution +0.0 pct point vs. prelim -0.0 point
Japan Q2 revised GDP: private inventories contribution +0.3 pct point vs. prelim +0.3 point; median forecast +0.4 point
Japan Q2 revised GDP: public investment contribution -0.0 pct point vs. prelim -0.0 point
Japan Q2 revised GDP: net export contribution +0.5 pct point vs. prelim +0.5 point; median forecast +0.5 point
Japan Q1 revised real GDP +0.5% q/q vs. +0.5% in previous report, +1.9% annualized vs. +1.9%
Cabinet Office: Japan GDP must grow real 0.08% q/q, or annualized 0.3%, in each quarter of fiscal 2026 (to March 2027) to hit +0.9% official forecast
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.