Japan's economy was outpaced by China in the second quarter in nominal terms, data showed on August 16, as sharply weaker than expected growth triggered fresh fears that the global recovery is losing steam.
As cooling exports and flat domestic consumption hit Japan's growth in April-June, the data pointed to the looming prospect of China overtaking Japan as the world's second-largest economy.
"The economy is leveling off," said Keisuke Tsumura, parliamentary secretary of the Cabinet Office.
Japan's real gross domestic product grew by an annualized 0.4% in the quarter, down from a revised 4.4% in the previous three months, missing forecasts of 2.3% growth in a Dow Jones Newswires economists' poll.
On a quarterly basis, growth was at 0.1%, down from a revised 1.1% in the previous quarter.
"It was a negative surprise," said Yoshiki Shinke, Dai-Ichi Life Research Institute senior economist.
The figures pose a challenge for Prime Minister Naoto Kan's government, which must balance a fragile economy with an agenda focused on cutting the industrialized world's biggest public debt, at nearly 200% of GDP.
However, the current data "make it even less likely that the government will move quickly to tackle the huge public debt," said Julian Jessop of Capital Economics in a research note.
Copyright Agence France-Presse, 2010