Growth in the economy of export-driven Japan slowed in the three months to June, official data showed yesterday, with the debt crisis in Europe and the unsteady global economy hampering demand.
GDP grew a worse-than-expected 0.3 percent in the second quarter from the previous three months, the Cabinet Office said, a fourth straight rise, but much slower than the brisk 1.3 percent seen in January-March.
The data came in significantly lower than market expectations for a 0.7 percent increase, as exports slowed despite a ramp-up in government spending since the March 11 earthquake and tsunami disaster last year.
The economic growth translated into an annualized 1.4 percent rise, below the market forecast for a 2.7 percent increase and sharply slower than the 5.5 percent expansion in the January-March quarter.
Adding to the headwinds being faced by the world’s No. 3 economy is the country’s strong currency, which has made the country’s exports less competitive in overseas markets.
However, Japanese Economic and Fiscal Policy Minister Motohisa Furukawa highlighted the growth of private demand to support his view for continued moderate growth.
“The economy of our country is trending upward, driven by domestic demand,” he said in a recently made statement.
“With the employment and earnings environment expected to improve further ... the economy is expected to maintain moderate growth for the July-September period and later,” he said.
“However, we need to pay careful attention to downward risks for the global economy amid the European fiscal debt crisis,” he added.
Private consumption, which accounts for about 60 percent of the Japanese economy, expanded 0.1 percent in the three months, dropping steeply from a 1.2 percent expansion in the previous quarter.
Exports of goods and services rose 1.2 percent during the April-June period, slower than the 3.4 percent seen in the previous quarter, the Cabinet Office said.
Imports meanwhile rose 1.6 percent, compared with a rise of 2.2 percent in January-March.
While officials stressed the bright side of the data, private economists sounded concerns as the Chinese economy, which is a key driver of regional growth, suffers a deceleration and stimulus programs at home begin to expire.
“In general, we can’t see any strength in the Japanese economy, which was mainly sustained by government fiscal measures,” said Hideki Matsumura, senior economist at the Japan Research Institute.
The government has taken a series of steps to spur growth, including offering incentives for fuel-efficient vehicle purchases and measures to rebuild the northern region hit by the deadly earthquake and tsunami.
“If the economy can maintain the current strength, it is likely to mark another growth in the July-September quarter,” Matsumura said.
Among factors for future concerns is the auto purchase programme ending likely by early next month, Matsumura said.
“The slowing Chinese economy is another concern. The Japanese economy may suffer a contraction in the October-December quarter,” he said.