Q3 - Economic Growth Stalls

Japan's economy grew at the slowest pace in three quarters during April-June, data showed, as cooling exports and falling consumption pointed to a recovery that was losing steam.

Real gross domestic product increased by an annualised 0.4 per cent in the quarter, sharply missing forecasts from economists polled by Dow Jones Newswires of 2.3 per cent annualised growth.

On a quarterly basis, growth was at 0.1 per cent, down from a revised 1.1 per cent in the previous quarter.

The Nikkei 225 index was 1.48 per cent lower following the release of the data.

The figures pose a challenge for Prime Minister Naoto Kan's government, which must balance an uncertain economic reality with an agenda dominated by the need to cut the industrialised world's biggest public debt.

In June, Japan's unemployment rate edged higher to 5.3 per cent, while production of automobiles and electronic gadgets underwent a surprise slip, amid signs that an export-driven recovery may be stalling.

Shipments of cars, gadgets and components have been crucial in off-setting weaker demand at home, but concern is mounting that Japan may be hit by Beijing's efforts to cool China's economy, together with fragile eurozone and US demand.

Deflation and weak domestic demand have long burdened Japan, as consumers tend to put off purchases in the hope of further price falls.

The planned expiry of government incentives to purchase cars in September may also weigh on production for the domestic market just as the overseas climate worsens, analysts say,

Another threat to Japan's exporters is a slowdown overseas, particularly in the United States.

US economic growth slowed dramatically in the second quarter, down sharply to 2.4 per cent from 3.7 per cent in the first quarter.

Such slowing global expansion is cooling an export sector that is also anxious about the strength of the yen, which recently touched a 15-year high against the dollar.

For every one-yen rise in the currency's value against the dollar, companies can lose tens of billions of yen earned overseas when repatriated, threatening a core part of Japan's economy.

http://www.smh.com.au/business/world-business/japan-growth-slows-as-recovery-loses-steam-20100816-125we.html