World Economy

Japan's April-June economic growth downgraded to 2.5 percent on-year, much slower than stellar preliminary reading

Key Points
  • Japan's second-quarter economic growth was revised down to 2.5 percent on-year from a preliminary reading of 4.0 percent
  • The disappointing data may weaken confidence in the government's economic policies and the business outlook
Laurence Griffiths | Getty Images

Japan's economic growth in the second quarter was much slower than seen in a stellar preliminary reading, government data showed on Friday, confounding hopes for a long awaited pick-up in domestic demand.

The downgrade was widely expected after data used to revise gross domestic product figures showed capital spending in April-June rose at a slower annual pace than the previous quarter.

While the disappointing data may weaken confidence in the government's economic policies and the business outlook, analysts still expect the economy to sustain a steady recovery as robust global demand underpins exports and a tightening job market improves the prospects for higher wages.

Japan's economy, the world's third largest, expanded at an annualized rate of 2.5 percent in the April-June quarter, less than the initial estimate of annualized 4.0 percent growth, Cabinet Office data showed. That was also lower than a median market forecast for a revision to a 2.9 percent.

On the quarter, the economy grew a revised 0.6 percent in real, price-adjusted terms, against a preliminary reading of a 1.0 percent increase and the median estimate of a 0.7 percent expansion.

Capital expenditure, a key component of gross domestic product, rose 0.5 percent for the quarter, marked down from the preliminary estimate of a 2.4 percent increase.

The data follows a recent run of indicators that suggests economic growth should continue in the current quarter thanks to solid exports and factory output.

Wage growth and household spending, however, remain lackluster despite a tight job market.