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December 10, 2009

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Home » Business » Economy

Caution puts brakes on Japan's recovery

JAPAN'S economy grew much less than first estimated in the third quarter, as cautious companies decided to save rather than spend, adding to evidence that its recovery is stumbling.

Real gross domestic product expanded at an annualized pace of 1.3 percent in the July-September quarter, the government said yesterday, much lower than its preliminary figure of 4.8 percent provided last month. The new figure corresponds to 0.3 percent growth from the previous quarter instead of the 1.2 percent first reported.

The big cut stems largely from capital investment ¨? spending by companies on equipment, factories and other assets ¨? which fell 2.8 percent from the previous quarter after the government incorporated additional data. The Cabinet Office had initially estimated that companies increased spending by 1.6 percent.

The tepid pace of third-quarter growth adds to recent signs that Japan's economic recovery may be losing steam. The world's second-biggest economy faces intensifying deflation on top of a still uncertain global outlook.

Compounding worries is the yen, which surged to a fresh 14-year high against the US dollar late last month.

Japan is particularly vulnerable to currency swings because it relies so heavily on exports. A stronger yen reduces the value of overseas profits for exporters and makes their products more expensive in foreign markets.

Prime Minister Yukio Hatoyama unveiled a fresh US$81 billion stimulus package on Tuesday to keep Japan from lurching back into recession and bolster his party's prospects ahead of upper house elections next year.


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