Japan's economy expanded 1.9% on an annualised basis in April-June, beating a median market forecast for a 1.4% increase, government data showed on Friday.

That followed a revised 0.9% contraction, larger than initial estimates, in the previous quarter, which put an end to the best run of growth since the 1980s bubble economy.

Compared with the previous quarter, GDP rose 0.5%, more than the median estimate for a 0.3% increase and following a 0.2% contraction in January-March.

In a sign the economic recovery was broadening, domestic demand was the main driver of growth.

Private consumption, which accounts for about 60% of the economy, was the biggest contributor, rising 0.7% on brisk demand for cars and home appliances, the data showed.

The gain was more than the median estimate for a 0.2% increase and marked a rebound from a revised 0.2% fall in the first quarter, it showed.

Many industries face labour shortages due to a rapidly ageing population. This helps push up wages but has also caused capacity constraints because some companies are shortening operating hours due to a lack of workers.

Japan certainly needs higher consumer spending to push up inflation, but with consumer prices taking so long to rise, the market has pushed back the timeframe in which they expect the BOJ to unwind monetary easing until 2020 or later, a Reuters poll on Thursday showed.

Capital expenditure rose 1.3%, exceeding market forecasts for a 0.6% increase and marking the biggest gain since October-December 2016.

The external environment, however, was less favourable, even without any direct impact to exports from increasing trade hostilities between the United States and its major trading partners over the quarter.

External demand, or exports minus imports, subtracted 0.1 percentage point from growth, missing expectations for a 0.1 percentage point contribution.

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