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September 12, 2009

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Home » Business » Economy

Retail drives Japanese growth

JAPAN'S growth in the second quarter was weaker than initially thought, but government figures yesterday still show that the world's second-largest economy has managed to climb out of a recession.

Gross domestic product, or the value of the country's goods and services, grew at an annual pace of 2.3 percent in April-June, following a year's contraction, the Cabinet Office said yesterday.

Preliminary data had said the economy grew at an annualized rate of 3.7 percent during the quarter.

The weaker numbers largely came from worse private sector inventory adjustments and investments, according to revised government data. On a quarterly basis, the economy grew 0.6 percent on quarter, revised from an earlier 0.9 percent rise.

Japan appears to be joining Germany, France and other economies in gradually recovering from the global financial crisis. But economists warn the recovery remains fragile and mostly based on improved exports while consumer spending is still low.

"Risk factors remain for the winter months, including the possibility that consumer spending will fall because of the flu," said Yasuo Yamamoto, senior economist at Mizuho Research Institute in Tokyo.

Yamamoto expects moderate growth to continue for the rest of the year but warns the momentum could ease.

Recovery in April-June was driven by demand for exports such as video recorders and other electronics goods on strong shipments to China and other emerging markets.

Government stimulus measures also helped, such as cash handouts for green products. But the impact of such measures is likely to run out of steam when incentive programs end.

Salaries are falling and the unemployment rate has risen to a record high 5.7 percent as companies such as Toyota Motor Corp and Sony Corp cut thousands of jobs.

The GDP data follows Thursday's report on machinery orders, a closely watched indicator of corporate capital spending, which dipped in July, suggesting the outlook remains murky. Data showed core private sector machinery orders plunged 9.3 percent from the previous month to the lowest level since 1987.


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