Japan Economic Recovery Strengthens Amid Revised Q2 Growth and Rising Rate Hike Expectations

Japan's economy demonstrated stronger-than-expected momentum in the second quarter of 2026, with annualized gross domestic product growth revised upward to 1.4 percent from the initial 1.1 percent estimate, driven primarily by robust external demand which expanded by 0.5 percent on a quarter-on-quarter basis. Although domestic elements remained mixed as private consumption held flat and capital expenditure declined by 0.9 percent, surging real wages and a strengthened currency reached a seven-month high against the dollar. This positive economic trajectory significantly intensifies market speculation that the Bank of Japan will implement a 25 basis point policy rate hike later this month to tighten monetary policy.