Japan's economy grew at faster rate in fiscal Q1 than initially thought on healthy consumer spending

Key Points

• Japan's economy grew at a seasonally adjusted 2.2% annualized rate in Q1, surpassing the initial estimate of 1.0%, driven by strong consumer spending and inventory adjustments.
• This marks the fifth consecutive quarter of growth in Japan's GDP, with a quarter-on-quarter increase of 0.5%, up from an earlier estimate of 0.3%.
• Concerns over U.S. tariffs on Japanese imports, particularly a significant increase for auto exports, pose a risk to the export-driven economy.
• Political uncertainty surrounds Prime Minister Shigeru Ishiba's recent resignation announcement, which may impact future coalition formations and market stability.

TOKYO (AP) — Japan’s economy expanded at a stronger rate in the fiscal first quarter than previously estimated, despite worries about U.S. tariffs and domestic political uncertainty, according to government data released Monday.

The Cabinet Office said Japan’s real gross domestic product, the sum value of a nation’s goods and services, grew at a seasonally adjusted 2.2% annualized rate in the April-June quarter from the previous quarter.

That was better than the preliminary estimate for 1.0% growth, which came out last month, as solid consumer spending and inventories lifted growth more than previously thought.

Quarter-on-quarter, Japan’s GDP grew 0.5%, up from the initial estimate for a 0.3% rise, which was also what analysts projected, according to RaboResearch.

That marked the fifth straight quarter of growth. The annualized number shows what the growth, or contraction, would have been if the quarterly rate continued for a year.

U.S. President Donald Trump’s move to raise tariffs on Japanese imports is a major worry for the export-dependent economy, especially auto exports, which now face a 15% tariff, up from 2.5%.

Another concern is the looming political uncertainty after Prime Minister Shigeru Ishiba announced Sunday he is stepping down as head of the ruling party. A party election will follow over the next weeks.

Private consumption rose 0.4%, according to the latest government data, better than the initial estimate for 0.2% growth, raising domestic demand growth into positive territory at 0.2% growth, instead of contracting 0.1%, as in the earlier data.

Japan’s benchmark Nikkei rose in morning trading, despite Ishiba’s announcement on resigning, as the move was somewhat expected, and the market appeared to welcome the action as a step forward.

But analysts say uncertainty remains because it’s still unclear what parties might be brought in to form a coalition with the ruling party.

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Yuri Kageyama is on Threads: https://www.threads.com/@yurikageyama