Q2 GDP Growth Revised Up to 1.4%, Bolstering Case for September BOJ Rate Hike

Japan's Cabinet Office revised second-quarter 2026 GDP growth up to an annualized 1.4% (0.4% quarter-on-quarter), from a preliminary 1.1% (0.3% QoQ), on stronger-than-first-reported capital expenditure — a 0.9% decline rather than the initially reported 1.2% drop. Private consumption, which accounts for more than half of the economy, was roughly flat after slipping in the preliminary reading. The upward revision reinforced market expectations of monetary tightening: swap rates were pricing a roughly 98% probability the Bank of Japan raises its policy rate 25 basis points to 1.25% at its September 18, 2026 meeting, with a further move to 1.5% largely priced in by January 2027. The yen strengthened to around ¥153.6/dollar, its firmest level in about seven months, pulling the Nikkei 225 down modestly to roughly 65,143 as exporters' earnings outlook came under pressure.