Japan’s economic growth weaker than forecast

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Japanese Prime Minister Shinzo Abe speaks before press in Ise, Mie prefecture, central Japan on January 6, 2014 following his visit to the Ise shrine. Abe defended his visit to a controversial war shrine while admitting there was no immediate prospect of holding summits with his South Korean and Chinese counterparts. AFP PHOTO / JIJI PRESS JAPAN OUT

Japan’s economy grew at a weaker-than-expected rate in the second quarter despite an aggressive spending policy by the government.

Gross domestic product grew at an annualised rate of 0.2% in the three months to June, below market forecasts for 0.7% and a marked slowdown from the 2% rate in the first quarter.

The figures come after the government launched a massive new stimulus package worth 28 trillion yen ($265bn; £200bn).

Japanese stocks fell after the data.

The benchmark Nikkei 225 share index dropped 0.3% while the broader Topix fell 0.5% on concerns that Asia’s second-largest economy will continue to struggle.

On top of Prime Minister Shinzo Abe’s fiscal stimulus, Japan’s central bank is running negative interest rates and an unprecedented asset-purchase programme.

Timothy Graf, head of macro strategy at State Street Global Markets said Japan’s growth figures “could have been a lot worse”.

There are “worries building over slowing domestic consumption, capital expenditure and the potential for weaker net exports thanks to a stronger yen,” he said.

“It still keeps markets focused on whether the Bank of Japan will ease policy later this year, but there may be some sense of relief that the current growth slowdown is not more aggressive.”

 

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