Japan upgrades Q2 GDP on stronger business spending

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TOKYO — Japan’s economy grew faster than the initially estimated in the April-June quarter, helped by solid capital expenditure, although a resurgence in COVID-19 is undermining service-sector consumption and clouding the economy’s outlook.

Revised gross domestic product (GDP) data by the Cabinet Office released on Wednesday showed the economy grew an annualized 1.9% in April-June, beating economists’ median estimate for a 1.6% gain and the initial estimate of a 1.3% expansion.

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It followed Prime Minister Yoshihide Suga’s announcement last Friday that he was stepping down, paving the way for the Sept. 29 ruling party leadership race, in which contenders will outline their plans to revive the world’s No. 3 economy.

The upward revision was caused by better-than-initially-estimated business spending figures, in a sign that capital expenditure and factory output more than offset weak service-sector activity on the back of global economic recovery.

However, global chip shortages may put a drag on Japanese car production and shipments while signs of China’s economic slowdown emerge as sources of concern.

The April-June GDP growth figures translated into quarter-on-quarter expansion of 0.5% in price-adjusted real terms, better than an initial reading of a 0.3% growth and the median estimate for a 0.4% gain.

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The capital expenditure component of GDP grew 2.3% in the second quarter from January-March, bigger than the median forecast for 2.0% growth and the preliminary 1.7% gain.

Private consumption, which accounts for more than half of Japan’s GDP, grew 0.9% in April-June from the previous three months, up slightly from a preliminary estimate of a 0.8% gain.

Domestic demand contributed 0.8 percentage points to revised growth figures, while net exports – or exports minus imports – shaved 0.3 percentage point off the second quarter growth. (Reporting by Tetshshi Kajimoto and Kantaro Komiya; Editing by Sam Holmes)