TOKYO- Japan’s economy likely grew an annualized 3.1 percent in April-June to mark a third straight quarter of expansion, according to a Reuters poll, helped by resilience in exports despite slowing global demand.
The increase would follow an annualized 2.7 percent in the first quarter. On a quarter-on-quarter basis, the economy probably expanded 0.8 percent .
“The data will show Japan’s economy is recovering moderately with consumption and capital expenditure maintaining momentum,” said Shinichiro Kobayashi, an economist at Mitsubishi UFJ Research & Consulting.
The data would be welcomed by the Bank of Japan which wants a slow but steady phase-out of its massive stimulus program and took steps last week to allow long-term interest rates to rise more.
External demand likely added 0.9 percent point to gross domestic product growth in April-June, after shaving off 0.3 percent point in the first three months of this year, the poll showed.
Capital expenditure is expected to have risen 0.4 percent after a 1.4 percent increase and the poll called for private consumption to have edged up 0.1 percent , slowing from a 0.5 percent gain.
“Consumption has been recovering, mainly for services industries as the economy has re-opened. But the recovery may have run its course as rising inflation weighs on real income,” said Ryutaro Kono, chief Japan economist at BNP Paribas.
The Bank of Japan’s surprise decision last week to raise a cap on interest rates was partly driven by policymakers’ growing worries ultra-loose monetary settings would spark a repeat of the bruising yen selloff that the economy saw last year.
The tweak to the BOJ’s bond yield curve control (YCC) was the result of brainstorming sessions that came to a head in May, say sources familiar with the decision, just over a month after Kazuo Ueda succeeded his dovish predecessor Haruhiko Kuroda as the bank’s chief.
Pressure from Prime Minister Fumio Kishida’s government also played a part, suggesting that future policy tweaks will be driven not just by the inflation outlook but market moves – notably the yen, the sources said.
“Yen moves have been and will remain a very important factor shaping Japan’s monetary policy,” one of them said. “The BOJ made that point clear this time in a way unseen in the past.”
The BOJ’s decision shook markets on Friday and contrasted sharply with Ueda’s more cautious comments in recent months about the dangers of retreating too quickly from accommodative Kuroda-era policies.
The focus on yen moves also means policymakers are now prioritizing dealing with the side-effects of decades of massive monetary stimulus, such as Japan’s yawning interest rate gap with economic peers that has pummelled its currency.
“Deep inside, Ueda probably feels the role of YCC has ended and is worried about its side-effects,” said an official who has known Ueda for decades. “There’s also a small but probable risk of inflation overshooting in Japan, which gave the BOJ reason to act.”
