Japan's economy expanded at the fastest pace in more than two years in the second quarter as consumer and company spending pick up, highlighting a long-awaited bounce in domestic demand. Ciara Lee reports
Happy spenders - happy economy. Consumer spending in Japan rising at its fastest pace in more than three years in the second quarter And helping the economy grow at its fastest rate in more than two years. GDP expanded an annualised 4 percent, beating an estimate of 2.5 percent. Compared to the previous quarter, the economy expanded 1.0 percent. It's been a long road for Prime Minister Shinzo Abe's reform programme, after years of stagnant inflation. The news offered the Bank of Japan hope that the tight labour market is finally giving the economy the boost it needs. (SOUNDBITE) (English) CEBR, CHIEF ECONOMIC ADVISER, VICKY PRYCE, SAYING: "I think what's going on right now is that finally the policies of serious quantitative easing are working. So yes I think Abe would be helped by this. What we're seeing is much faster growth than anyone had anticipated. A lot of it comes because of the types of policies in terms. We see that in the area of household spending. So domestic demand is certainly picking up." Private consumption, which accounts for about two-thirds of GDP, rose 0.9 percent from the previous quarter as shoppers splashed out on durable goods. But Japan's economy minister remained cautious. (SOUNDBITE) (Japanese) JAPANESE ECONOMY MINISTER, TOSHIMITSU MOTEGI, SAYING: "If you ask me whether private consumption has fully recovered, I would say it still lacks strength in some areas, which will need to be followed up with policy." Since launching QE four years ago, the BOJ has pushed back the timing for reaching its 2 percent inflation target six times This latest spending spree though might go some way towards generating sustained inflation.