Japan economy returns to black after first dip in two years

Japan's economy rebounds as consumers companies spend more

Japan's economy expanded at an annualized rate of 1.9 percent in the April-June quarter, government data showed Friday.

Officials at Japan's Cabinet Office say consumer spending was up 0.7 percent after snowy weather dragged the number into negative territory in the previous period.

The economy's contraction in the first quarter snapped its longest streak of growth since the boom days of the late 1980s.

"The Japanese economy staged an ideal rebound, partly backed by robust corporate activities", Hideo Kumano, chief economist at Dai-ichi Life Research Institute, told AFP.

"Global trade conflict remains a risk factor... focus is how much the US demands Japan over trade issues".

US President Donald Trump is pushing Tokyo to sign a bilateral free-trade agreement and has threatened to impose higher tariffs on auto imports including those from Japan.

Marcel Thieliant, senior Japan economist at Capital Economics, said that growth similar to the second quarter could be penciled in for the third and fourth quarters, but also warned about "downside" risks from trade disputes.

"Since the automakers have vast supporting industries, the impact of the tariffs would spread widely", he said.

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Mizuho Research Institute senior economist Kentaro Arita estimated that potential U.S. tariffs could cost Japan's auto industry as much as US$10 billion (S$13.7 billion).

Auto tariffs could deal a blow to the vaunted "Abenomics" policies of Japanese Prime Minister Shinzo Abe, who is aiming to secure his post by winning his party's presidential election next month.

He said he expects spending to remain relatively strong ahead of a sales tax hike expected next year.

In late July, the Bank of Japan revised down its inflation forecasts, making minor tweaks to a monetary policy that has so far failed to lift prices.

Private consumption, which accounts for about 60 per cent of the economy, was the biggest contributor, rising 0.7 per cent on brisk demand for cars and home appliances, the data showed.

On a quarter-on-quarter basis, GDP grew 0.5 per cent, versus the median estimate for a 0.3 per cent increase.

Japan has bounced back from a poor start to the year.

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