Japan Q2 economic growth revised down sharply from stellar first reading

Pedestrians are pictured at a shopping district in Tokyo, Japan, on Aug 14, 2017.
Pedestrians are pictured at a shopping district in Tokyo, Japan, on Aug 14, 2017. PHOTO: REUTERS

TOKYO (REUTERS) - Japan's economic growth in the second quarter was much slower than seen in a stellar preliminary reading, government data showed on Friday (Sept 8), confounding hopes for a long awaited pick-up in domestic demand.

The downgrade was widely expected after data used to revise gross domestic product (GDP) 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 annualised rate of 2.5 per cent in the April-June quarter, less than the initial estimate of annualised 4.0 per cent growth, Cabinet Office data showed. That was also lower than a median market forecast for a revision to a 2.9 per cent.

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

Capital expenditure, a key component of gross domestic product (GDP), rose 0.5 per cent for the quarter, marked down from the preliminary estimate of a 2.4 per cent 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 lacklustre despite a tight job market.