Japan Growth Slows as Exports Struggle

The economic growth translated into an annualized 1.4% rise, below the market forecast for 2.7% increase and sharply slower than the 5.5% expansion in the January-March quarter.

Growth in export-driven Japan slowed in the three months to June, official data showed Monday, with the debt crisis in Europe and the unsteady global economy crimping demand.

Gross domestic product grew a worse-than-expected 0.3% 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% seen in January-March.

The data came in significantly lower than market expectations for a 0.7% increase, as exports slowed and despite a ramp-up in government spending since the March 11 quake-tsunami disaster last year.

The economic growth translated into an annualized 1.4% rise, below the market forecast for 2.7% increase and sharply slower than the 5.5% expansion in the January-March quarter.

Private consumption, which accounts for about 60% of the Japanese economy, expanded 0.1% in the three months, dropping steeply from a 1.2% expansion in the previous quarter.

Exports of goods and services rose 1.2% during the April-June period, slower than 3.4% seen in the previous quarter, the Cabinet Office said.

Imports meanwhile rose 1.6%, compared with a rise of 2.2% in January-March.

Adding to the headwinds being faced by the world's number three economy is the strong yen, 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.

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 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 program ending likely by early September.”

"The slowing Chinese economy is another concern. The Japanese economy may suffer a contraction in the October-December quarter," he said.

Copyright Agence France-Presse, 2012   

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