Japan is confronted with old demons. After seeing its growth accelerate in the first quarter to 0.6%, the gross domestic product (GDP) Japan fell 0.4% from April to June Annualized, growth fell 1.6%.
This is the first decline recorded in the archipelago since the third quarter 2014 (July to September). Japan was then temporarily fell back into recession in the wake of an increase in VAT (from 5% to 8% in early April 2014) derailing the recovery. Over the whole of last year, activity contracted by 0.1% before returning tone early 2015 (+ 1.1% in the first quarter according to revised data released Monday).
Foreign trade and household consumption at half
weak link in the economy, consumer spending, which accounts for some 60% of GDP, fell 0.8% during the period ‘April-June (after + 0.4% in the first quarter). Non-residential business investment are in turn emerged down 0.1% (after + 2.8% in Q1).
Foreign trade has also contributed negatively to GDP growth (-0.3 points), while exports fell by 4.4% compared to the first quarter.
A “temporary” hollow?
The conservative Prime Minister Shinzo Abe has been trying for more than two years to revive the economy through a strategy called “abenomics” consisting of three “arrows” (fiscal stimulus, monetary easing and structural reforms), but its efforts are struggling to pay off.
The Governor of the Bank of Japan (BoJ), Haruhiko Kuroda, however, wants to believe that the low point in the spring is only “temporary” and he sees a rebound for the period July- September.
If the contraction were to continue, it could be difficult for the BoJ to achieve its ultimate objective of 2% current inflation in 2016, warn economists predict for most of the expansion monetary easing policy by the end of the year to give a new boost to the economy.
(With AFP)
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