Japan’s Economy Shows Signs of Life as Spending Revives

TOKYO—The Japanese economy returned to growth in the April-June quarter thanks to a recovery in spending by households and companies.

Japan’s gross domestic product expanded 0.8% in the three months to June from the previous quarter, preliminary government data showed Thursday. That compared with economists’ forecast for 0.6% growth in a poll by data provider Quick. The economy contracted 0.6% in the January-March quarter.

The figures come after the Bank of Japan opted to raise interest rates last month and signaled potential for further increases, stoking concern among some that the economy wasn’t yet strong enough to stomach the move, as a premature increase could dial back inflation too far and lead to a slowdown.

The economy grew 3.1% on an annualized basis, which reflects what would happen if the second-quarter pace continued for a full year.

Private consumption rose 1% from the previous quarter, snapping four consecutive quarters of declines. Car sales recovered, shrugging off the impact of production suspensions that had crimped output earlier in the year.

The rising cost of living and a struggling economy have led to a decline in Prime Minister Fumio Kishida’s voter support. Kishida had introduced measures to protect households from inflation and revive consumption, including tax cuts and energy subsidies. But they didn’t help his approval ratings recover much, and Kishida said Wednesday that he won’t seek to stay in office.

Economists expect consumption to recover further in the July-September period thanks to the effects of the income and residential tax cuts. Real wages adjusted for inflation also turned positive in June for the first time in more than two years.

Thursday’s data showed capital expenditures also rose 0.9% on the back of solid corporate earnings.

One print showing some improvement may not be enough to convince analysts that the economy is getting back on track, however.

It will be difficult to say that the economy has emerged from its seesawing phase, NLI Research Institute economist Taro Saito said before Thursday’s data release. In order to confirm the recovery of the Japanese economy, it will be necessary to examine developments in the July-September quarter and thereafter, he said.

Economists at Moody’s Analytics meanwhile said in a recent note that even a robust increase in Thursday’s data would follow a series of lackluster gross domestic product reports that have captured falling output for the better part of a year.