Private consumption drives Japan’s growth in 3 quarters

Japan’s gross domestic product (GDP) expanded an annualised 2.2% in Q2, accelerating from a revised 0.1% increase in January-March. It was smaller than the median market forecast for a 2.5% increase. The growth was driven largely by a 1.1% rise in private consumption, which accounts for more than half of Japan’s GDP. But the outlook remains uncertain due to a resurgence in Covid-19 infections, slowing global growth, supply constraints, and rising raw material prices that are boosting households’ living costs. Policymakers hope pent-up demand will underpin consumption until wages rise enough to make up for increasing living costs. But analysts said there is uncertainty on whether companies will hike salaries amid heightened risks of slowing global demand.