Gross domestic product expanded at an annual 2.3 percent pace in the three months ended June 30, slower than the 3.7 percent reported last month, the Cabinet Office said.
Today’s figures show Japan’s recovery from its deepest postwar recession is even weaker than previously thought, and intensifies pressure on the incoming government, led by Yukio Hatoyama, to resuscitate household demand. With unemployment at a record high and one-third of factory capacity idle, Japanese growth may depend on overseas demand.
From the previous quarter, the world’s second-largest economy grew 0.6 percent, less than the 0.9 percent the Cabinet Office estimated last month.
Net exports -- the difference between exports and imports - - contributed 1.6 percentage points to the expansion, unchanged from the first reading. That was offset by the deeper-than- expected decline in stockpiles. Inventories subtracted 0.8 percentage point from quarterly output, more than the 0.5 percentage point first reported.
The inventory figures suggest manufacturers have more room to increase output to restock inventories they ran down when global trade seized up in the wake of the global financial crisis, said Shinke at Dai-Ichi Life. Companies increased production at the fastest pace in half a century last quarter.
Consumer spending rose 0.7 percent as opposed to 0.8 percent in the preliminary report, spurred by cash handouts and incentives introduced by the outgoing Liberal Democratic Party to buy cars and electronics.
Reports since the second quarter suggest the economy is slowing. Gains in industrial production decelerated for a fourth month in July, exports plunged 36.5 percent and the jobless rate jumped to 5.7 percent, the worst reading since 1953. Machinery orders, an indicator of capital spending, tumbled 9.3 percent.
Declining corporate profits and falling tax revenues means that the DPJ, which won national elections on Aug. 30, will have more difficulty funding its promises to beef up the country’s safety net and encourage more consumer spending through childcare handouts and abolishing highway tolls. The party pledged not to increase new bond sales to avoid expanding a debt burden that’s the largest in the industrialized world.