Preview: Japan revised Q2 GDP set to test BOJ September rate hike bets

Japan's upcoming release of revised second-quarter GDP data is set to provide crucial direction for the Bank of Japan's upcoming policy meeting on September 17-18. Preliminary figures showed annualized growth of 1.1% and quarter-on-quarter growth of 0.3%, both missing consensus estimates, largely driven by a 1.2% decline in capital expenditure and flat private consumption. However, recent upbeat corporate capex and profit surveys indicate an upward revision is probable. An upgraded GDP print would solidify expectations for a BOJ interest rate increase, with overnight swap markets currently pricing an 80% likelihood of a hike this month. This outcome would likely propel 10-year Japanese Government Bond (JGB) yields beyond their current 30-year highs near 2.925%, strengthening the Japanese yen while putting downside valuation pressure on rate-sensitive segments of the Nikkei 225 index. Conversely, a downward revision or failure to upgrade capex could soften tightening expectations, sparking renewed yen depreciation and offering a short-term relief bounce for Japanese equities.