Exports help Japanese economy grow 0.3% in the second quarter

O Gross Domestic Product (GDP) of the fourth largest world economy increased by 0.3% between April and June compared to the previous quarter, according to official data released today.

This is, however, a slowdown from the growth of 0.5% in the first quarter and from the forecasts of analysts consulted by Bloomberg, which pointed to a steady expansion of 0.5%.

“ The rise in real wages and the reduction in fuel taxes will probably have sustained household consumption,” said Bloomberg Economics Taro Kimura, a specialist before the new economic data was published.

The Japanese economy “resisted well, even with the weight of the disturbances in the supply of crude oil linked to the conflict involving Iran,” he added.

Inflation, excluding fresh products, also accelerated to 1.6% in June, in homologous terms, driven by the rise in energy prices, in an economy heavily dependent on imports of hydrocarbons.

The fall of the yen, which reached a minimum of 40 years compared to the dollar before the recent joint intervention by the United States and Japan to strengthen it, also increased the cost of imports.

But this weakness of Japanese currency was an advantage for Japanese exporting groups, helping them to be more competitive on the international market and benefit from the explosion of demand for electronic components linked to artificial intelligence.

In June, the country's exports had the fastest growth since November 2022, with an increase of 19.3% in homologous terms, driven both by sales of semiconductor equipment and by the depreciation of the yen.

At home, Tokyo sought to counter inflationary pressures. Following a vast recovery plan approved at the end of 2025 and significant tax reductions in energy, new aid was adopted in the spring by the Prime Minister's Government, Sanae Takaichi, to support the consumption of families.

Takaichi announced at the end of July that the executive would drastically reduce the consumption rate on food, from the current 8% to 1% from next April, to combat inflation more effectively.

Another favorable factor in the second quarter was the maintenance of wage growth, sustained by good business results and a tight labor market.

Nominal wages increased by 3.4% in June in homologous terms, after a growth of 3.3% in May, well above inflation.

“ The unfavourable effects of high crude oil prices should be hit and the positive circle linking incomes and expenditure should be progressively intensified,” the Bank of Japan (BoJ) predicted at the end of July.

For Taro Kimura, “this solid number” of growth “will strengthen the expectations that BoJ can anticipate the next rise in rates for September or October,” said Taro Kimura.

The monetary authority had decided at the end of July to keep the interest unchanged, after having raised in June the leading interest rate to 1%, the highest level in more than three decades.

But experts anticipate further rises in autumn, in a context of persistent inflation and strong divergence from the much higher rates of the US Federal Reserve (Fed), which penalises the yen against the dollar.

The Japanese currency also suffers from the growing concerns surrounding Tokyo's expansive fiscal policy, based on recovery plans and tax reductions, while public debt exceeds double GDP.

“ With the defense expenditure to be defined by the end of the year, concerns about a further increase in expenditure should be intensified ", point out specialists of the UBS bank.

“The lack of clear identification of sources of funding for reducing the consumption rate, scheduled for April 2027, may also raise concerns,” they added.