(Bloomberg) -- Japan’s economy expanded less in the second quarter than initially reported, as growth in business investment was revised lower.

Gross domestic product grew at an annualized pace of 1.3% in the three months through June from the previous quarter, revised Cabinet Office data showed Monday. That compared with a preliminary reading of 1.8%. The revised figure matched economists’ median estimate.

Key Insights

  • Consumer spending has helped drive growth this year as exports have fallen due to a slowing global economy and the U.S.-China trade war. Private spending is expected to continue to increase through the third quarter, but take a hit from a sales-tax increase starting in October.
  • Despite an uncertain global outlook, business investment has continued to rise as companies, particularly non-manufacturers, seek to cope with a severe labor shortage. However, more overseas-focused manufacturers are already cutting back on capex.
  • The U.S.-China trade war is casting a shadow over the global outlook, and by extension the prospects for continued growth in Japan’s trade-dependent economy. Japan is also keen to clinch a trade deal with the U.S. that would avert tariffs on auto imports.

What Bloomberg’s Economists Say

“Looking ahead, fiscal stimulus and last-minute consumption ahead of the sales-tax increase are likely to support modest growth in 3Q. But the risks are to the downside. The U.S.-China trade war threatens to damp exports. Risk-off sentiment could push up the yen -- cutting into Japan’s competitiveness and damping inflation.”

--Asia Economist TeamClick here the view the piece.

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  • Business investment rose 0.2% from the previous quarter. Economists forecast was for a 0.7% rise.
  • Private consumption increased 0.6% from the previous quarter in line with a median estimate.
  • The current account balance for July was a surplus of 2.0 trillion yen, compared with a 2.05 trillion yen surplus estimated by economists.

--With assistance from Tomoko Sato.

To contact the reporter on this story: Yoshiaki Nohara in Tokyo at ynohara1@bloomberg.net

To contact the editors responsible for this story: Paul Jackson at pjackson53@bloomberg.net, Henry Hoenig

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