Japan’s economy expanded 0.4 percent in the April-June quarter from the previous quarter, sharply slowing on lackluster corporate investment and consumer spending, Cabinet Office data showed Friday.
The gross domestic product, or the value of goods and services produced domestically, grew at an annualized rate of 1.7 percent. It was a sharp drop from a revised growth of 6.6 percent in the January-March period and 7.4 percent growth in the October-December quarter.
The real GDP, adjusted for price changes, grew for the fifth straight month as prices continued to fall. But the nominal GDP shrank 0.3 percent in the first contraction in five quarters.
Most analysts said that the weak figures were natural after exceptionally strong growth in previous months, and that growth will continue. But many added that the recovery was nearing its peak.
“We’re getting the first inkling of exports losing steam, and I don’t see it spreading enough to ignite strong domestic demand,” said Kazutaka Kirishima, a senior economist at Sumitomo Life Research Institute.
But Takeshi Erikawa, vice minister at the Cabinet Office, said, “The slowdown is most likely temporary,” noting that corporate recovery was continuing to spread to households, and that business spending is likely to remain firm.
The economy continued to rely on exports. Net exports — exports minus imports — contributed 0.3 percentage point to overall growth in the reporting quarter. Construction equipment orders from the rest of Asia helped boost exports, a Cabinet Office official said.
Domestic demand added 0.1 point to the GDP, as business spending remained flat and household spending grew 0.6 percent in real terms from the previous quarter.
More significantly, private consumption exceeded nominal wages by a record 26.35 trillion yen, indicating consumer confidence might not last long, said Yasunari Ueno, chief market economist at Mizuho Securities Co.
“Consumers have been loosening their purse strings, but how much is left inside their purses?” he asked. “There’s a limit to how much you can spend when wages aren’t growing.”
Private consumption makes up some 55 percent of Japan’s GDP.
Masaaki Kanno, JP Morgan Securities’ chief economist, said Friday’s numbers are no cause for excessive pessimism, as exports and capital expenditures are solid.
GDP figures are likely to rebound in the July-September quarter, he and other economists said. That data will reflect television and home appliance purchases brought on by the heat wave and the Athens Olympics, as well as a strong showing in machinery orders.
But in the last quarter of the calendar year, Japan’s growth might be hit by the impact of high crude oil and other materials prices and a slowing U.S. economy, Kanno said.
Contraction won’t take place until next year, giving Japan three years of growth, said Kirishima.
“Three years of growth is nothing to be ashamed of,” Kirishima said. “But only certain sections of the economy, sections many of us don’t share in, will have enjoyed growth.”
Nikkei takes cue, dives
Japan’s benchmark Nikkei stock index fell to a three-month closing low Friday as Japan’s weaker-than-expected gross domestic product data for the April-June quarter and an overnight tumble in U.S. shares spurred selling across the board.