TOKYO- Japan”s economy grew less than expected in the April-June quarter but economists said healthy capital spending and consumption, along with a brighter picture for exports, suggested a sustained recovery is finally under way.
The third straight quarter of growth — and signs that deflation may be easing — is good news for Prime Minister Junichiro Koizumi, who is seeking voter approval in a Sept. 11 election for reforms he says are vital to the future of the world”s second-biggest economy, Reuters reported.
Gross domestic product grew 0.3 percent in real, price-adjusted terms in April-June from the previous quarter, Cabinet Office data showed on Friday, compared with economists” median forecast of a 0.5 percent rise.
It translated into 1.1 percent annualised growth, below a consensus market forecast of 2.0 percent and trailing the 3.4 percent annualised U.S. growth in the same period.
"It”s weaker than expected due to the decline of inventories, but final demand is quite strong. Basically, it”s a strong report despite the weak headline number," said Takehiro Sato, a senior economist at Morgan Stanley Japan.
"Consumption and all domestic demand is firm. Exports are also strong, showing that demand is quite balanced."
Domestic demand, such as consumption and capital spending, has replaced exports as the main engine of growth this year as global demand for Japanese goods slowed, notably in China.
But exports rebounded in April-June, helped by brisk automobile sales to the United States.
External demand, or exports minus imports, became a positive contributor to growth for the first time in four quarters.