Japan has taken global economic analysts by surprise with its second quarter results. Consistently beating all expectations, the country's economy has shown rapid growth. The numbers reveal that Japan's economic growth has been at its fastest pace in history over the past two years.
Domestic demand supports great economic data
The main reason behind Japan's better than expected results is that domestic demand has been very strong. On one hand, where consumer spending has been heartening, capital expenditure has also helped shore up the economy. In fact, both of these have been increasing at the fastest rate in three years. These have helped ensure that the economic growth is rapid here. To give you a good idea of where Japan stands today, the country's GDP was expected to grow by 2.5 % annualized but it actually grew by 4 percent (April- June) as per government data. This number also happens to be the largest increase posted since the first quarter of 2015. Expectations of a 0.6 percent economic expansion were overwhelmed by the actual 1.5 percent expansion that was seen here.
Growth likely to continue for now
What is good news for the Japanese and for investors in its markets is that experts predict this growth phase will continue for now. With consumer spending looking all set to improve in the coming years, there is little doubt that sustained inflation will be an achievable target. Private consumption has also grown by some 0.9 percent, which again, is higher than expectations which hovered at around 0.5 percent. Since this makes up about two-thirds of the total country's GDP, it has significant influence to wield on the country's economic fortunes.
Historic weak area showing improvement
If Japan has historically remained weak in one area, it would be consumer spending. The latest figures indicate that consumers have been spending much more than usual on durables, which is quite unexpected. This also indicates that consumer spending is looking up and is all set to leave behind its dubious status of being Japan's weakest economic area. Bank of Japan has long been saying that this will happen and so has the government but this is the first indication that consumer spending is really moving ahead. Weak consumer spending, which has prevented the BOJ from setting a firm deadline for achieving the 2 percent inflation levels, may not restrict the economy for long now.