Japan’s Cabinet Office announced on Monday (September 8) revised data showing that the country’s Gross Domestic Product (GDP) for the second quarter of 2025 (April to June) increased by 2.2% on an annualized basis. This growth is significantly higher than the previously announced 1.0% in early August and has exceeded market expectations. The growth was mainly driven by increased private consumption and inventory, demonstrating the resilience of the Japanese economy amid trade and political uncertainties.
In the second quarter, GDP grew by 0.5% on a quarter-on-quarter basis, higher than the initial estimate of 0.3%. Private consumption, which accounts for over half of the Japanese economy, was revised upward from an initial estimate of 0.2% to 0.4%. This increase reflects spending on dining, entertainment, and some corporate expenses included in the new statistics.
Furthermore, domestic demand contributed 0.2 percentage points to GDP, reversing the negative contribution shown in the initial estimate, while external demand contribution remained at 0.3 percentage points. However, business equipment investment, an indicator of private demand, only grew by 0.6%, lower than the initial 1.3% and the market’s original estimate of 1.2%.
Despite the latest data showing better-than-expected economic performance, there are widespread concerns in the market that President Donald Trump’s tariff policies could drag on Japan’s exports in the third quarter, weakening economic momentum.
Shinichiro Kobayashi, chief economist at Mitsubishi UFJ Research Institute, said, “Consumer momentum may not be sufficient to offset the decline in exports during the period of July to September.”
Yuichiro Nozaki, an economist at Nomura Securities, pointed out that though the revised data is unlikely to immediately affect the Bank of Japan’s (BOJ) decision-making, tariff risks and political uncertainties could delay the timing of interest rate hikes.
Last week, Tokyo and Washington officially implemented a trade agreement reached in July, reducing tariffs on some Japanese automobiles and other products, providing some limited cushion to the export-oriented economy.
As this data is released, Prime Minister Shigeru Ishiba’s resignation sparking political instability, the market is closely monitoring the new government’s policies and the upcoming third-quarter data release to assess the actual impact of external environment and political changes on the economy.
(Reference: Reuters)