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JAPAN’S economy expanded faster than expected last quarter led by solid domestic demand, boosting the case for the Bank of Japan to raise its benchmark rate again this year while giving embattled Prime Minister Shigeru Ishiba some rare good news. 

Gross domestic product grew at an annualized pace of 1% in the three months through June from the prior period, surpassing economists’ forecast of a 0.4% gain, the Cabinet Office reported Friday. Authorities revised the previous quarter’s results to 0.6% growth, reversing from a preliminary contraction. 

Gains were led by business investment, which rose 1.3% from the previous quarter, surpassing the consensus estimate of 0.7% growth. Private consumption nudged 0.2% higher.

Signs of stronger than expected resilience in the economy will likely encourage views that the central bank will hike again this year. While the BOJ is expected to hold steady when it next sets policy on Sept. 19, some 42% of economists surveyed by Bloomberg anticipate a move in October. Governor Kazuo Ueda said last month that authorities will keep raising borrowing costs if they’re confident domestic demand can stay steady.

“I had been expecting a rate hike in October, and I feel like the chances of that have gone up a bit,” said Atsushi Takeda, chief economist at Itochu Research Institute. “The market consensus also seems to be shifting toward an earlier hike now.”

The yen strengthened immediately after the GDP release, gaining as much as 0.3% versus the dollar, the most among major currencies on Friday. Japanese shares rose, led by a 4% increase in the Topix Banks Index. Financial stocks are benefiting from bets that a rate hike from the BOJ may come sooner rather than later, helping to boost their profitability.

Friday’s GDP figures are the first to reflect the impact of President Donald Trump’s so-called reciprocal tariffs and auto levies, which took effect in April. During the period, Japan faced a 10% baseline tariff along with 25% levies on cars. A 25% tax on US steel imports introduced in March was doubled in early June.

“Even amid all the uncertainty surrounding US tariffs, business investment has also been growing steadily,” Hiromu Komiya, economist at the Japan Research Institute, said.

Ishiba’s administration has said the car levies will be set at 15%, the same as the current baseline rate, once Washington adjusts executive orders in line with an agreement reached in late July. Earlier this month the government cut its real growth projection for this fiscal year to 0.7% from a previous forecast of 1.2%. The downgrade partly reflected a darkening global economic outlook resulting from Trump’s trade policies.

Against that backdrop, the economy’s show of resilience in the April-June period will provide some political relief for Ishiba, whose ruling coalition lost its majority in the upper house in last month’s election partly due to widespread frustration over the persistent rise in costs of living. Ishiba has so far rejected calls from within his party to resign.

Despite global trade headwinds, corporate spending remained firm, consistent with the BOJ’s latest Tankan survey that showed large companies plan to boost investment by 11.5% this fiscal year, up from a previously estimated 3.1%.

Private spending, which makes up nearly 60% of GDP, picked up a tad more than expected despite prolonged inflation. Previously released data showed that household outlays rose in both May and June, in a sign of resilience. The uptrend was partly aided by solid wage gains from this year’s pay negotiations, which have been gradually showing up in paychecks.

Net exports contributed 0.3 percentage point to growth. Despite heavier US tariffs, exports held up in real terms, rising 2% from the prior period as companies cut selling prices to preserve market share. Some exporters also front-loaded shipments under the 10% levies as Trump threatened to raise the levies to 25%. Monthly trade data showed that exports fell in value in both May and June, but not significantly in terms of volume.

Resilient inbound tourism also propped up net exports. Spending by foreign visitors increased by 18% in the quarter, with tourist arrivals in the first half of 2025 hitting a record high.

The third quarter may reflect a bigger impact from tariffs now that front-loading has stopped. Other risks to growth include persistent inflation, with data due next week expected to show consumer price growth remained well above the BOJ’s target in July. 

“The key here is exports,” said Takeda. “The most important thing for the BOJ is to assess how exports trend from July onward.”

As for personal consumption, wage gains pledged for workers at the nation’s largest companies exceeded 5% this year, surpassing the pace of inflation. That could sustain spending in coming months, according to Komiya.

“On the consumer side, we’re expecting real wages to start picking up in the fall, and that should give households a bit more strength going forward,” he said. –BLOOMBERG

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TOKYO – A sudden suspension of the sole train to Japan’s Expo 2025 stranded more than 30,000 visitors, with some forced to spend a sweltering night near the station and more than 30 people sent to hospitals by Thursday morning.

A power outage abruptly shut the metro line in Osaka on Wednesday night while a crowd was packed into the Expo site’s station.

As of 9:30 pm Wednesday, around 30,000 people were stranded, the Expo organiser said.

“So many people were packing the station that it felt like a steam bath,” an elderly woman told local broadcaster MBS news.

Many, including families with children, wound up sleeping on benches under the Expo’s wooden “Grand Ring” or inside pavillons turned into shelters.

It took the Osaka Metro around eight hours to restore the Chuo line’s service, with trains not fully operational until early Thursday morning.

By then, 36 people had been sent to hospitals for symptoms including headaches and dizziness, according to the Expo organiser.

Expo staffers spent the night trying to cheer trapped visitors by lighting up objects and turning on music.

Bowing deeply, Osaka Metro officials apologised for “causing immense trouble” to those affected, blaming a short-circuit for the outage.

Japan has been suffering a punishing summer heatwave, recording its hottest July since records began in 1898.

Osaka last hosted the Expo in 1970 when it attracted 64 million people, a record until Shanghai in 2010.

Last month, Expo organisers reported welcoming 10 million visitors, with the fair running until October. –AFP

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KUALA LUMPUR — The United Nations (UN), Turkiye, United Kingdom (UK) and the European Union have condemned Israel’s approval of plans to construct thousands of settler units in the occupied West Bank, warning that the move violates international law and further undermines the two-state solution.

UN Secretary-General Antonio Guterres (picture), through a statement by his spokesman’s office, stressed that Israeli settlements in the West Bank, including East Jerusalem, are “in violation of international law” and that construction in the E1 area would “sever the northern and southern West Bank, severely undermining the prospects for a viable, contiguous Palestinian state.”

He called on Israeli authorities to immediately halt the process, reiterating his call for Israel to cease all settlement activities “pursuant to its obligations under international law and as reaffirmed by the International Court of Justice in its Advisory Opinion of 19 July 2024.”

The Turkish Foreign Ministry also condemned the move, describing it as a step that disregards international law and UN resolutions, while targeting the territorial integrity of Palestine.

The ministry reaffirmed Ankara’s support for the establishment of an independent and sovereign Palestinian state based on the 1967 borders, with East Jerusalem as its capital.

In London, UK Foreign Secretary David Lammy said the Israeli government’s actions were “further jeopardising the two-state solution” and urged an immediate ceasefire in Gaza, the release of all hostages, an increase in humanitarian aid and a plan for lasting peace.

EU foreign policy chief Kaja Kallas echoed the condemnation, urging Israel to halt settlement construction.

She warned that the decision breaches international law and, if implemented, would “permanently cut the geographical and territorial contiguity between occupied East Jerusalem and the West Bank.”

She stressed that unilateral actions, combined with settler violence and military operations, were fuelling tensions and eroding the possibility for peace, adding that the EU was considering action to protect the viability of the two-state solution.

Israeli media reported on Thursday that Finance Minister Bezalel Smotrich had approved the construction of 3,401 settler units in Ma’ale Adumim, east of Jerusalem, and an additional 3,515 units in surrounding areas.

The project, in the E1 corridor, would effectively split the West Bank into northern and southern parts, isolating East Jerusalem.

The Palestinian Foreign Ministry denounced the plan as part of Prime Minister Benjamin Netanyahu’s vision for “Greater Israel,” saying it would entrench the occupation and destroy the viability of a Palestinian state. — BERNAMA-ANADOLU

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ISTANBUL — Air Canada will begin cancelling flights on Thursday ahead of a possible strike by flight attendants, aiming to ensure an orderly shutdown of operations, the airline announced.

According to Anadolu Ajansi (AA), the first flight cancellation will take place on Thursday, with the number of cancellations to increase from Friday, leading to a full suspension of Air Canada and Air Canada Rouge services by the weekend.

The union representing about 10,000 flight attendants issued a 72-hour strike notice on Wednesday, with the industrial action set to begin on Saturday unless an agreement is reached or the government intervenes. In response, the airline issued a lockout notice.

Air Canada said passengers affected by cancellations would be informed and offered a full refund.

The carrier has also coordinated with other Canadian and international airlines to provide alternative travel options where possible.

“We regret the impact a disruption will have on our customers, our stakeholders and the communities we serve,” said Air Canada chief executive officer Michael Rousseau.

Negotiations between the airline and the union stalled on Tuesday, with both sides far apart on contract terms.

The union has cited “poverty wages” for flight attendants and the absence of pay for time spent working while planes are on the ground as key issues.

Air Canada said it had proposed a 38 per cent increase in total compensation over four years, along with additional benefits.

“Despite our best efforts, Air Canada refused to address our core issues,” the union said on social media. — BERNAMA-ANADOLU

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