Japan's economy stalls in April-June, casts doubts on Abe's policies

Mon Aug 15, 2016 3:40am EDT
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By Leika Kihara and Tetsushi Kajimoto

TOKYO (Reuters) - Japan's economic growth ground to a halt in April-June as weak exports and shaky domestic demand prompted companies to cut spending, putting fresh pressure on premier Shinzo Abe to come up with policies that will produce more sustainable growth.

The weak reading underscores the challenges policymakers face in ending two decades of crippling deflation, as an initial boost from Abe's stimulus programs, dubbed "Abenomics", appears to be quickly fading.

The world's third-largest economy expanded by an annualized 0.2 percent in the second quarter, less than the 0.7 percent increase markets had expected and a sharp slowdown from a revised 2.0 percent increase in January-March, Cabinet Office data showed on Monday.

"Overall it looks like the economy is stagnating. Consumer spending is weak, and the reason is low wage gains. There is a lot of uncertainty about overseas economies, and this is holding back capital expenditure," said Norio Miyagawa, senior economist at Mizuho Securities.

"The government has already announced a big stimulus package, so the next question is how the Bank of Japan will respond after its comprehensive policy review, which is sure to lead to a delay in its price target."


On a quarter-on-quarter basis, gross domestic product showed no growth in April-June, compared with market expectations for a 0.2 percent rise.   Continued...

A crane at a construction site is seen behind Japan's national flag in Tokyo, Japan, August 12, 2016. Picture taken on August 12, 2016.  REUTERS/Kim Kyung-Hoon