Japan cuts Q2 GDP on weak spending, wages slide

Japan’s economy grew less than initially estimated in the second quarter and wages slumped in July, casting doubt over central bank projections that solid domestic demand will keep the country on course for a recovery.

Capital expenditure and private consumption both fell in the April-June period, revised gross domestic product (GDP) data showed on Friday, underscoring the fragile state of Japan’s economy, which is already facing headwinds from weakening Chinese and U.S. growth.

Real wages adjusted for inflation fell in July for a 16th straight month in a sign households continued to feel the pinch from rising prices, separate data showed, boding ill for consumption.

“Weak exports to China may be making Japanese manufacturers cautious about investing. The hope is that service-sector firms will pick up the slack, though sluggish consumption could discourage them to spend money, too,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Japan’s economy grew an annualised 4.8% in April-June, the revised data showed, down from a preliminary estimate of 6.0% growth and below market forecasts for a revised 5.5% expansion.

The main factor behind the downgrade was a 1.0% drop in capital expenditure, compared with a preliminary flat reading, casting doubt on the BOJ’s view that robust corporate spending will underpin Japan’s post-pandemic economy. The revised decline was bigger than a median market forecast for a 0.7% fall.

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