Japan’s economy shrank by more than previously thought in the second quarter, with companies cutting back more severely on capital spending after the March earthquake and tsunami than first expected.
Japan’s revised GDP shrank at an annualized pace of 2.1 percent in the quarter, the Cabinet Office said, revising last month’s figures indicating a 1.3 percent contraction as firms deferred spending plans after the disasters.
The revision comes as recent data have underlined worries about Japan’s recovery, as a slowing global economy and the impact of a strong yen on the profitability of exporters cloud hopes for a rebound in the second half of the year.
“The risk that the pace of recovery could slow down from the autumn cannot be ruled out,” said Yoshiki Shinke, chief economist at Dai-Ichi Life Research Institute. “Overseas economies have been weaker than previously expected and it will be harder for exports to help drive the Japanese economy, affecting the pace of growth.”
Data on Thursday showed that July machinery orders, a key indicator of corporate capital spending, plunged 8.2 percent after rising the previous month, as firms scaled back.
Yesterday’s downward revision came within market expectations, with capital spending on upgrades or new machinery and equipment in the second quarter seeing a decline of 0.9 percent compared to a 0.2 percent gain in the preliminary data.
For the third straight quarter the economy has now contracted, shrinking by a revised 0.5 percent quarter-on-quarter, compared to an initial reading of a 0.3 percent drop.
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