Q2 (Apr-Jun) Growth slows to 1.4% annualised; lower than US

The Japanese economy slowed more sharply than expected in the April-June quarter as exports and consumer spending lost steam, raising the specter of further deceleration for the rest of this year.

Japan had stellar growth in the first quarter on stepped-up government spending on rebuilding in areas battered by the March 2011 earthquake and incentives to boost sales of fuel-efficient vehicles.

But fiscal policy appears no longer enough to offset the growing impact of Europe's persistent debt crisis and the resulting global slowdown on Japan's export-reliant economy.

"Support from fiscal policy is expected to gradually decrease from now on," said Ryutaro Kono, chief economist at BNP Paribas. "At the same time, any rapid recovery in the world economy is difficult to expect, making it very likely for exports to remain sluggish for a while. We expect the pace of recovery to slow in the second half of this year."

Japan's gross domestic product grew at a price-adjusted annualized pace of 1.4% in the April-June quarter after the previous quarter's revised 5.5% expansion, according to data released Monday by the Cabinet Office. It was slightly below the U.S.'s second-quarter growth rate.


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