On August 17, the Cabinet Office released preliminary figures for gross domestic product (GDP) for the April–June quarter. Real GDP grew 0.3% quarter-on-quarter, or 1.1% on an annualized basis, while nominal GDP grew 1.2% quarter-on-quarter, or 4.8% on an annualized basis. In monetary terms, real GDP totaled 598 trillion yen, compared with 688 trillion yen for nominal GDP. While noting that “Attention should be given to the effects caused from the situation in the Middle East,” the government nevertheless expressed the view that “the Japanese economy is recovering at a moderate pace,” following three consecutive quarters of positive growth.

However, when taking a closer look at the breakdown, the situation does not necessarily warrant an optimistic outlook. Domestic demand decreased by 0.2 percent, with both private and public demand contracting. The weakness in domestic demand was offset by external demand, which increased by 0.5 percent. External demand, calculated as exports minus imports, was boosted by a decline in crude oil imports due to the worsening situation in the Middle East as well as growth in exports of goods and services. On the other hand, private final consumption expenditure (personal consumption) showed a lackluster result of down 0.02%. In particular, final consumption of households, excluding imputed rent for owner-occupied housing, was down 0.1%, also showing weak performance.

This spring, wage growth remained strong at both large and small-to-medium-sized companies. In fact, according to the Monthly Labor Survey (June preliminary report), total cash earnings rose 3.4% year-on-year, while the Family Income and Expenditure Survey showed that income among workers’ households (two-or-more-person households, for June) increased by 3.9% in nominal terms and 2.0% in real terms. However, consumer spending fell by 1.5% in nominal terms and 3.3% in real terms, marking the seventh consecutive month of year-on-year decline in real terms. Rising prices, higher social insurance premiums, and rising mortgage rates are all increasing the sense of financial strain among the “working-age generation.” Furthermore, as their “parent generation” relies on pensions, its purchasing power is also being effectively eroded by the macroeconomic slide mechanism. These factors will naturally lead to more restrained consumption across all generations.

Meanwhile, the Nikkei Stock Average hit a record high, official land prices rose for the fifth consecutive year, and the average summer bonuses at large companies, as compiled by Keidanren (Japan Business Federation,) exceeded 1 million yen for the first time (based on 163 companies across 22 industries with 500 or more employees). This certainly looks like a booming economy. Then where is the prosperity when it comes to personal consumption, which remains sluggish?

This summer, I read The Trading Game (by Gary Stevenson, translated by Toshio Chiba, Hayakawa Publishing Corp.), which recounts the dramatic life story of “Gary,” a top trader at Citibank. The book contains the following points: The wealth of ordinary, hardworking families flows to the rich. The poorer the middle class and the government become, the richer the wealthy get. The answer is inequality. “It was not temporary. It was terminal. It was the end of the economy. It was cancer.” Gary bet on this growing inequality and made a fortune.

Takashi Mizukoshi, the President
This Week’s Focus, August 16 – August 20, 2026