Corporations' Hesitance Cools Growth in Japan ; Slowdown in Expansion May Stall Plan to Tackle Mountain of Public Debt

By Tabuchi, Hiroko | International Herald Tribune, August 13, 2013 | Go to article overview

Corporations' Hesitance Cools Growth in Japan ; Slowdown in Expansion May Stall Plan to Tackle Mountain of Public Debt


Tabuchi, Hiroko, International Herald Tribune


Economic growth slowed in the quarter that ended in June to an annualized rate of 2.6 percent, raising concerns that moves to tackle the enormous public debt may be delayed.

Japan's economic growth slowed in the quarter that ended in June to an annualized rate of 2.6 percent, government data showed Monday, clouding the outlook for the economic policies of Prime Minister Shinzo Abe and raising concerns that he may delay moves to tackle the enormous public debt.

This was the third consecutive quarter of growth for Japan's gross domestic product of about $5 trillion, the third largest in the world, after those of the United States and China.

Still, the expansion fell short of analysts' expectations for Japan, whose economy grew at a robust annual pace of 3.8 percent in the previous quarter, helped by the Abe government's monetary and fiscal stimulus drive.

Economists polled by Reuters had expected Japan's economy to grow at a similarly healthy clip in the April-to-June quarter. But weak capital expenditure, reflecting continued caution among Japanese corporations about the country's long-term prospects, slowed growth, according to figures released by the Cabinet Office.

Compared with the previous quarter, the Japanese economy grew six- tenths of 1 percent. Private consumption rose eight-tenths of a percent over the previous quarter, better than expected, as a brightening mood in Japan pushed up spending on food, travel and luxury products. But capital expenditure fell one-tenth of a percent, below a market forecast for an increase of seven-tenths of a percent.

"Corporations' cautious attitudes was the main factor limiting growth," Harumi Taguchi, principal economist at the research firm IHS, said in a note. Companies, he added, "remained hesitant to increase capital expenditure and continued to cut inventory in light of the slow recovery of exports and uncertainty regarding the sustainability of the economic recovery."

Though export growth slowed in the quarter, shipments were expected to pick up as the recovery gathered steam overseas, Mr. Taguchi said, especially in the United States and Europe.

A weaker yen has also assisted Japanese exports. But less robust growth in China, Japan's largest trading partner, is a concern. …

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