Japan's economy falters

Japan's economy contracted 0.4 percent - or at an annualized pace of 1.6 percent - in the April-June quarter, official data showed Monday. Weak consumer spending at home and slowing exports contributed to this contraction.

Private consumption, which accounts for about 60 percent of the Asian country's GDP, fell 0.8 percent from the previous quarter while exports dropped 4.4 percent.

Still, the figures published by the Cabinet Office came in slightly better than market expectations for a fall of 0.5 percent, or a 1.8 percent annualized drop.

The downturn follows stronger-than-expected growth in the first quarter, when the economy grew at an annualized rate of 3.9 percent, driven by a pick up in capital spending.

Additional stimulus?

But the sharp plunge from the previous quarter's growth marks a setback to "Abenomics" - a term referring to the Japanese PM's economic policies designed to pull the world's third largest economy out of recession and deflation.

The program called for big government spending, massive Bank of Japan (BoJ) monetary easing and reforms to cut red tape in Japan's highly regulated economy.

The downturn also increases pressure on policymakers to offer additional monetary or fiscal stimulus later this year to revive growth.

Earlier this month, Bank of Japan (BoJ) chief Haruhiko Kuroda said he would consider expanding the bank's record 80 trillion yen ($640 billion) annual asset-buying scheme - a means to pump money into the economy - if weak oil prices kept holding back near-zero inflation.

The BoJ now expects Japan's economy to expand 1.7 percent in the fiscal year while inflation would come in at 0.7 percent. That was down from an earlier estimate of 2.0 percent and 0.8 percent respectively.

China's economic slowdown and its impact on its Asian economies have also dampened expectations of any rebound in growth between the July-September period.

sri/hg (AFP, Reuters)