According to data released by the Cabinet Office, Japan’s GDP for Q2 2019 has come in weaker than initially estimated, at 1.3% vs. the prelim reading of 1.8%. Although this figure is considerably lower than the original estimate, it has come in line with economists’ forecast.

The US-China trade war and the weakness in the global economy have pressured Japan’s economy, which relies heavily on exports. This latest reading reveals that the economy grew by only 0.3% QoQ compared to the previous quarter, while the prelim reading estimated at 0.4% growth from Q1.

Capital spending was one of the worst affected factors, registering a mere 0.2% growth in Q2, far below the initial estimates of 1.5% and the forecast of 0.7%. Meanwhile, private consumption came in as expected, rising by 0.6% during this period, as expected.

Net exports contributed to a 0.3% decline in GDP while domestic demand boosted the economy by accounting for 0.6% growth in Japan’s GDP. However, the proposed sales tax hike due to come into effect in October could impact domestic demand and possibly drive further weakness in the economy.

Markets are widely anticipating that the BOJ will announce new stimulus measures to support the economy at its upcoming meeting this month. There’s a high likelihood that the Japanese yen could continue to appreciate if other leading central banks turn dovish soon, and this could add more pressure on the central bank to ease its policies. A stronger yen does not bode well for the export-oriented economy of Japan.

On the release of this news, the Japanese yen is trading mostly unchanged, with USD/JPY trading at around 106.90 at the time of writing.