Japan economic indicators show weakness in domestic demand and manufacturing

Japan's economic indicators show signs of weakness in domestic demand. Real GDP for the April-June quarter grew by 1.1% annually, a figure that fell significantly short of economist predictions of 2.1%. While external demand supported growth, internal demand struggled, with private consumption declining by 0.02% for the first time in eight quarters.

Several factors contributed to this downturn. In the manufacturing sector, the business condition index dropped by 20 points in July, reaching -60.0. This decline was attributed to decreased sales caused by typhoons and a reduction in private construction projects.

On a national level, rising costs for crude oil and raw materials—driven by Middle East tensions—have fueled food price increases and encouraged household saving behaviors. Despite positive real wage growth, consumer spending remains weak. Some analysts suggest that a proposed reduction in the consumption tax on food products could help alleviate the burden on households and stimulate domestic demand.