Japan's economy grows annualized 1.9 pc in Q2

Japan's economy returns to growth in Q2

Japan certainly needs higher consumer spending to push up inflation, but with consumer prices taking so long to rise, economists have pushed back the timeframe in which they expect the BoJ to unwind monetary easing until 2020 or later, a Reuters poll on Thursday showed.

Japan's economy is expected to have recovered from a contraction in the first quarter as household spending improved, but trade tensions between Washington and Tokyo loom as a major risk to the country's exports and investment outlook.

The economy grew 0.5 percent quarter-on-quarter in the April-to-June period, compared with a 0.2 percent decline in the first quarter, according to data from the Japanese Cabinet Office.

The data represented a quick turnaround after a series of eight consecutive quarters of growth ended in the January-to-March quarter, interrupting a winning streak not seen since the heady days of Japan's "miracle" boom of the 1980s. The country's big automakers, including Toyota, Nissan and Honda, are anxious about US President Donald Trump's threats to impose tariffs on vehicle imports.

"The pace of the global economic growth, except that of the US, is slowing down but it is still expanding, so Japan's exports will likely pick up as well", said Yoshiki Shinke, chief economist at Dai-ichi Life Research Institute.

"Since the automakers have vast supporting industries, the impact of the tariffs would spread widely", he said.

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"For the third and fourth quarters, we've pencilled in similar growth to the second quarter, but the risks are a bit to the downside", said Marcel Thieliant, senior Japan economist at Capital Economics.

And threatened auto tariffs could deal a blow to the vaunted "Abenomics" policies of Prime Minister Shinzo Abe, who is aiming to secure his premiership by winning his party's presidential election in September.

Private consumption, which accounts for about 60 per cent of the economy, was the biggest contributor, rising 0.7 per cent on brisk demand for cars and home appliances, the data showed.

On an annualized basis, GDP was up 1.9 percent - again topping expectations for 1.4 percent following the 0.6 percent contraction in the previous three months.

"Usually, a hot summer is a positive factor but it's too hot this year and that may affect economic activities negatively", Japan Research Institute's Mr Shimoda said.

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