Japan's Economy Reduces at a Minus 1.2 Percent Annual Rate in Q2

Revised data released Tuesday shows that Japan's economy contracted at a minus 1.2 percent annual rate during the second quarter.

In a report from St. Louis Post-Dispatch, economists are rather impressed with the figure reported since it is better than what was expected. A preliminary report last month showed that Japan's economy contracted at a minus 1.6 percent annual rate.

According to experts, the contraction is caused by an upward revision in private inventories, with a general trend that is weaker than expected. Meanwhile, corporate investment dropped 0.9 percent, which is a bigger decrease than the earlier reported 0.1 percent slump.

In a report by Asian Correspondent, there is also a revision in consumer spending from the earlier reported 0.8 percent to 0.7 percent, which offset weaker government and corporate investment. Capital Economics' Marcel Thieliant commented, "The details were hardly reassuring."

Meanwhile, Hometown Stations says the strongest growth during the second quarter can be seen in the country's public investment and private residential investment. The revisions to the lax laws made property owners demolish old houses to be reconstructed. This boosted housing stars. However, there has been a sluggish growth in the auto registrations and industrial production. China's economic slowdown may also affect the future of exports in the next several months.

According to JP Morgan's Masamichi Adachi, "We recognize the downside risk to our growth forecast, with continuing disappointing news from Asian neighbors and recent market turmoil."

"In all, we continue to think that domestic demand is firming, but external demand may be weaker than we currently anticipate," said Adachi.

Domestic demand remained constant in the quarter. The economy contracted 0.3 percent on a quarterly basis. The government aims to increase growth through inflation, but the slow increase in wages and exports have prevented them from achieving this goal. Meanwhile, employee compensation dropped 0.2 percent in the second quarter.