Japanese economy grows

Japan's economy grew an anaemic 0.1 percent in the April-June quarter, reinforcing a growing expectation that a shake-out in global markets will prompt the central bank to rethink a rate hike this month. Only around a quarter of respondents in a Reuters poll said they now saw the Bank of Japan (BoJ) raising rates this month.
Most saw the central bank getting back on track by September, although some analysts warned of another slow quarter of economic growth ahead. The expansion in gross domestic product, the broadest measure of the economy, fell short of the modest consensus forecast for a 0.2 percent increase, partly due to weak exports, although analysts said that in itself would not prompt the BoJ to hold fire.
"If the GDP figure alone is considered, the BoJ would raise rates on solid fundamentals," said Mamoru Yamazaki, chief economist at RBS Securities.
Swap contracts based on the BoJ's key policy rate priced in on Monday a 30-35 percent chance of a rate rise this month, compared with around 75 percent just last Thursday.
The Reuters poll was even more pessimistic, with just 12 out of 45 surveyed on Monday expecting a rate hike this month to take rates to a decade-high 0.75 percent. Two weeks ago two-thirds in a similar poll had expected an August rise However 80 percent of those polled said they expected two rate rises by next March, a largely unchanged view.
The quarterly growth translated into an annualised rise of 0.5 percent, much slower than a revised 3.2 percent increase in January-March and US second-quarter growth of 3.4 percent.
Tame income growth also kept consumers' purse strings tight. Private consumption rose for the third straight quarter but, at 0.4 percent, it was half that seen in January-March. Growth in corporate capital spending, however, a key driving force of the economy, rebounded to 1.2 percent from 0.3 percent in the previous quarter, pointing to solid expansion ahead.
The government made a minor revision to the way it compiles preliminary gross domestic product from the April-June data, which included a change in the calculation method for inventory contributions to GDP. The change pushed down quarterly GDP growth by 0.1 percentage point.