Japan's economy bounces back thanks to a consumption boost

STORY: Japan's economy bounced back from a slump at the start of the year, expanding faster than expected in the second quarter.

That's thanks to a strong pick up in consumer spending.

It helps support the case for another near-term hike in interest rates by the Bank of Japan.

Government data out Thursday showed the country's GDP grew 3.1% in the April-to-June period compared to last year, beating expectations.

Private consumption, which accounts for more than half of Japan's output, rose for the first time in over a year by 1%.

It had been a soft spot in the economy, though - the country's households have been struggling with a rising cost of living.

That's been blamed at least in part on higher import prices because of a weak yen.

That same weak currency has seen a surge of tourism - giving retail sales at businesses like Uniqlo a boost.

However, rising living costs was one of the factors that prompted Prime Minister Fumio Kishida to announce this week that he plans to resign.

Now, analysts say the consumption rebound after more than a year is likely to encourage the central bank to push for the rate hike later this year.

Last month, the BoJ raised interest rates to levels not seen in 15 years.

It also detailed a plan to slow its huge bond buying, in another step toward phasing out Japan's decade of massive monetary stimulus.

The bank has forecast that a solid economic recovery will help inflation sustainably hit its 2% target, and justify raising interest rates further.