TOKYO: Japan’s economy expanded by a faster-than-expected annualised 3.1% in April-June, rebounding from the previous quarter thanks to a strong pick up in consumption and backing the case for another near-term interest rate hike.

The Bank of Japan had forecast that a solid economic recovery will help inflation sustainably hit its 2% target, and justify raising interest rates further.

The increase in gross domestic product (GDP) compared with a median market forecast for a 2.1% gain, and followed an upwardly revised 2.3% slump in the first quarter, government data showed on Thursday. The reading translates into a quarterly rise of 0.8%, beating a 0.5% increase expected by economists in the Reuters’ poll.

“The results are simply positive overall, with signs for a pick-up in private consumption backed by real wage growth,” said Kazutaka Maeda, an economist at Meiji Yasuda Research Institute.

“It supports the BOJ’s view and bodes well with further rate hikes, although the central bank would remain cautious as the last rate increase had caused a sharp spike in the yen.”

Private consumption, which accounts for more than half of the economic output, rose 1.0%, compared with forecast for a 0.5% increase and the first gain in five quarters.