Japan's economy grew more than expected in the second quarter supported by strong household spending, but trade tensions loom large as risks to export and investment outlook. The recovery in consumer spending is a welcome development by the BoJ but not enough to change interest rates.
While markets expect the economy to continue recovering, some expect in turn, that rising trade tensions will hurt export and manufacturing the main drivers of growth in the world's third-largest economy.
The Japanese economy grew by 1.9 percent on yearly basis in the second quarter of 2018, following a 0.6 percent contraction in the first quarter. In a sign of economic recovery, domestic demand was the main driver of growth.
The data showed that private consumption, which accounts for about 60% of the economy, was the largest contributor, rising by 0.7%. Japan needs to increase consumer spending to increase inflation.
