Japan’s 2Q24 GDP surprised with the economy expanding more than expected as private consumption and business spending, as well as residential investment and public investments supported growth, offsetting the drags from net exports and net private inventories, UOB Group economist Alvin Liew notes.

Expectations for growth rebound to extend into 3Q

“We expect the latest growth rebound to extend into 3Q supported by an extension of the consumption rebound, aided by influx of tourists and accelerated tech investments. But downside risk factors will continue to loom. While the sequential rebound for 2Q GDP was above expectations, the 1H GDP still contracted by -0.86% y/y. As a result we lower our 2024 GDP growth forecast to 0.2% (2023: 1.9%) before picking up to 1.7% for 2025.”

“We continue to expect the BOJ to stay on the rate tightening trajectory although it may not be a continuous cycle and likely to be a limited normalisation path. We expect BOJ to keep its policy rates unchanged in the next Sep 2024 MPM, and the next hike may come in 4Q 24, via a 25-bps hike to 0.50% which we believe will be the terminal rate.”