Japan’s Economy Slows During Second Quarter
The economic growth in Japan came to a screeching halt during the April through June quarter as shaky demand domestically and weak exports prompted businesses to lower their spending, putting new pressure on the country’s Premier, Shinzo Abe to find policies that would produce additional sustainable growth.
The weak economic reading underscores challenges policymakers are facing in bringing to an end two decades of deflation as an early boost from Abe programs of stimulus appear to be fading quickly.
The third largest economy in the world expanded by 0.2% as an annual rate during the second quarter, which is less than the increase of 0.7% markets expected and a steep slowdown from the revised increase of 2% for the first three months of 2016, showed data released on Monday by the Cabinet Office.
One a basis of quarter on quarter, the gross domestic product did not show any growth during the April through June quarter, compared with expectations in the market of an increase of 0.2%.
Private consumption, which represents close to 60% of the country’s GDP, increased by 0.2% slowing down from an increase of 0.7% for the previous three-month period.
Capital expenditure was down by 0.4% after a drop of 0.7% during the first quarter, which suggests that there is uncertainty over the outlook of the global economy as well as weak domestic markets keeping companies from increasing spending.
Overseas demand cut 0.3 percentage points from the GDP, cutting into growth for only the first time in the past four quarters and adding to the pain that weak global demand has inflicted on an economy that is export reliant.
Slight hope could be seen thanks to a jump in housing investment of 5%, the best increase since 2011, due partly because of the ultra loose Bank of Japan monetary policy that has pushed mortgage rates down, said an official from the Cabinet Office.
This month, Abe’s cabinet announced a new economic package that has 13.5 trillion yen or $133 billion in new fiscal measures, which it hopes will help the economy break up external headwinds to help sustain a moderate overall recovery.
However, the plan needs time to produce and skeptics have said it lacks in new spending.
The Bank of Japan increased its stimulus last month through a slight increase in its purchase of assets and remains under pressure to increase its stimulus during September.