Japan second-quarter GDP shrinks less than expected on inventory gains

Mon Sep 7, 2015 8:54pm EDT
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By Leika Kihara

TOKYO (Reuters) - Japan's economy shrank less than expected in the second quarter although capital expenditure fell more than originally forecast, revised data showed, keeping policymakers under pressure to do more to energize the fragile recovery.

Analysts expect any rebound in July-September growth to be feeble as factory output unexpectedly fell in July and China's slowdown dampened prospects for a solid recovery in exports.

"Factory output lacks strength in July-September due to sluggish exports of cars and electric machinery," said Junichi Makino, chief economist at SMBC Nikko Securities.

"If consumer spending fails to pick up, the government may compile a supplementary budget" to prop up growth, he said.

The world's third-largest economy shrank an annualized 1.2 percent in April-June, less than the initial estimate of a 1.6 percent contraction, Cabinet Office data showed on Tuesday.

The median market forecast was a revision to a 1.8 percent contraction.

Capital expenditure fell 0.9 percent from the previous quarter, more than a preliminary 0.1 percent drop, clouding the outlook for the world's third-largest economy.

But the weakness in capital spending was offset by gains in inventories, which contribute to economic growth.   Continued...

A worker rides a bicycle past containers at a port in Tokyo August 19, 2015. REUTERS/Issei Kato