Japan and NZ Economic Growth Resumes Amid Inflation Concerns

Recent economic data from Japan and New Zealand suggest that growth has resumed in both countries. In Japan, despite an initial slowdown due to US tariffs imposed by the Trump administration in April 2025, the actual impact was limited, with corporate profits for IT-related firms improving in 2026.

The Federal Reserve cut its policy interest rate in response to a slowdown in US employment in 2025, but it has since headed towards improvement. Inflation increased to 4.1 percent in the June quarter due to higher fuel prices from the Middle East conflict, but core inflation, expected wage growth, and inflation expectations remain consistent with returning to the 1-3 percent target band by mid-2027.

New Zealand's economic recovery has resumed, driven by resilient demand from trading partners and strong export prices. However, weak income growth, job insecurity, and flat house prices continue to weigh on household spending in Auckland and Wellington. The Reserve Bank of New Zealand (RBNZ) committee remains alert to ensure inflation returns sustainably to 2 percent over the medium term.

Bank of Japan Governor Ueda emphasized the need for careful assessment of the cumulative impact of five policy rate hikes, while also noting that recent rises in long-term rates mainly reflect global yield increases. He highlighted a focus on upside price risks and scrutinizes FX moves as factors contributing to those risks.