Japan’s economy rebounded at a weaker pace than first thought in the second quarter as companies cut investment and stockpiles amid a slow recovery from the worst recession in decades, the government said yesterday.
The world’s second-largest economy grew 0.6 percent in April-June from the previous quarter, worse than an initial estimate of 0.9 percent, data showed. Annualized growth was revised down to 2.3 percent from 3.7 percent.
But it was still the first expansion in five quarters — ending a year-long recession — and analysts said the downgrade was largely because of cuts by companies to their stockpiles of unsold goods, which bode well for the future.
Outgoing Economic and Fiscal Policy Minister Yoshimasa Hayashi said the decline in stockpiles was a positive development.
“From a broad prospective, it is a positive development that progress is being made in inventory adjustments,” Hayashi said.
Japan’s economy started shrinking in the second quarter of last year amid global economic slowdown and suffered annualized contractions of more than 12 percent for two consecutive quarters up to March.
Hideyuki Araki, an economist at Resona Research Institute, said companies were still struggling with excess capacity.
“Production is recovering on the back of improving exports but the future still looks uncertain,” with deflation squeezing corporate profits, he said.
Firms’ investment in factories and equipment is unlikely to show a strong upturn anytime soon unless overall demand recovers, he said.
Corporate inventory cuts reduced second-quarter growth by 0.8 percentage points, while lower capital spending lopped off 0.7 points, the data showed.
Private-sector capital investment shrank a revised 4.8 percent from the previous quarter, worse than previously thought.
Business leaders are cautious about the policies of the incoming government, led by the Democratic Party of Japan (DPJ), which are to be launched next week.
“Since the DPJ advocates deeper cuts in greenhouse gas emissions, higher minimum wages and other policies [which can affect business activities], companies want to see what steps it will actually take,” Araki said.
The DPJ, which won a recent landslide election victory, has promised to boost household incomes with measures including cash allowances for families, a higher minimum wage and better worker protection.
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