The economy shrank an annualized 1.2 percent in the second quarter of 2015 in inflation-adjusted terms, revised upward from preliminary data but confirming the first decline in three quarters amid weak consumption and exports, government data showed Tuesday.
The April-June contraction in real gross domestic product, upgraded from a 1.6 percent fall in a preliminary report released Aug. 17, translates into a 0.3 percent decrease from the previous quarter, the Cabinet Office said.
Private consumption, which accounts for about 60 percent of Japan’s GDP, dropped 0.7 percent month-on-month, slightly upgraded from an earlier-reported 0.8 percent fall due to stronger sales of vehicles and beverages.
A Cabinet Office official said mounting inventories at manufacturers also contributed to the upward revision of GDP, or the total value of goods and services produced domestically. But this may not be a good sign, as makers would not necessarily be able to fulfill projected sales for such stock.
Despite the upgrade in April-June GDP, “the overall trend has not changed, with spending and exports proving to be sluggish,” the official said.
Exports fell 4.4 percent and imports contracted 2.6 percent, both unchanged from the preliminary report.
Corporate capital spending, which the government sees as key to shoring up the economy, shed 0.9 percent, downgraded from a 0.1 percent decrease, while housing investment was unchanged at 1.9 percent growth.
Last year, the economy fell into technical recession, with GDP contracting in the six months to September following the April 2014 consumption tax hike to 8 percent from 5 percent — raising doubts about Prime Minister Shinzo Abe’s economic policy mix, dubbed “Abenomics.”
Although the effects of the sales tax increase may have softened, the economy is now feeling the impact of a China-led global economic slowdown, with some economists saying Japan’s exports are not expected to come back soon.
“As exports are not likely to bounce back rapidly, the economic outlook depends on how much domestic demand, including business investment and private consumption, can recover down the road,” said Junichi Makino, chief economist at SMBC Nikko Securities Inc.
“Even if GDP expands (in the third quarter), the size of recovery may be small. If private consumption does not come back, there will be a higher chance of a supplementary budget being compiled during the extraordinary Diet session” this autumn, he added.
A total of 41 private-sector economists, surveyed by the Japan Center for Economic Research last week, said the economy is projected to grow an annualized real 1.67 percent in the July-September period.
The latest government data also showed that public investment climbed 2.1 percent, compared with a 2.6 percent increase in the initial estimate, while government consumption rose 0.5 percent, upgraded from 0.4 percent growth.
In nominal terms, or unadjusted for price changes, the economy expanded an annualized 0.2 percent, compared with the initial estimate of a 0.1 percent increase.