Japan's Economy Falters as BOJ Rate Hike Prospects Remain Strong

The Japanese economy posted a disappointing 1.1% annualized GDP growth in the second quarter, falling short of market forecasts.

The data showed that private consumption fell by 0.02%, while capital spending declined by 1.2%, contradicting market expectations for a 0.5% increase and a 0.4% gain, respectively.

However, analysts believe that the BOJ will proceed with a rate hike next month due to persistent price pressures and robust underlying momentum in the economy.

'Today's GDP data was a bit weak but the economy is likely to continue recovering moderately,' said Naoki Hattori, chief Japan economist at Mizuho Research Institute. 'Given risks of underlying inflation overshooting its target, the BOJ is likely to proceed with a rate hike next month.'