New data show signs of slowdown in Japan

By Yuri Kageyama
Associated Press

TOKYO — Japan's economy barely grew during the quarter ending Sept. 30 and in the April-June period it actually shrank instead of squeezing out slight growth, according to revised government data released yesterday.

The numbers underline growing worries that the nearly two-year rebound in the world's second-largest economy may be fizzling out as an export boom dwindles and a rise in consumer spending fails to make up for the downturn.

Japan's gross domestic product — or the value of the nation's goods and services — during the July-September quarter grew 0.1 percent from the previous quarter, but it contracted 0.1 percent in April-June.

In its initial report last month, the government said the economy grew 0.1 percent in July-September and 0.3 percent in April-June.

The government also revised growth for the fiscal year ended March 31 to 1.9 percent from 3.2 percent.

Junichi Makino, senior economist at Daiwa Institute of Research in Tokyo, said the danger sign in the latest data was a slowdown in consumer spending, although he remained relatively optimistic about prospects for next year.

"The feeling is growing that the economy is weak," he said. "There's weakness in households and at companies. And so we can see it as an overall weakening."

Yesterday's figures showed that business investment was strong but private consumption was heading downward.

Other factors that could hurt the economy have arisen lately, such as surging oil prices and the declining U.S. dollar.

Japan imports most of its oil, and a weak dollar diminishes the value of the overseas earnings of Japanese exporters.

"Japan's economy is adjusting slightly amid an uptrend," Economy Minister Heizo Takenaka said.

Satoru Ogasawara, economist at Credit Suisse First Boston, said the economy will likely pick up after production and inventory adjustments are finished. A strong U.S. economy in coming months will probably help lift the Japanese economy as well. "Today's data confirms that real growth wasn't as strong as the initial data suggested."

Some analysts say signs that Japan's growth is losing steam may affect its tax policy.