-Yuichi Kodama, chief economist for Meiji Yasuda Life Insurance Co.
Japan's economy shrank in the second quarter as overseas demand for Japanese goods weakened, while households' spending dropped, fuelling speculation the government would act to support the world's third biggest economy. Japan's GDP declined 1.6% on an annualized basis in the three months through June, the Cabinet Office reported, compared with the 1.9% contraction predicted by economists, and following a revised growth of 4.5% in the first quarter. Private consumption, which accounts for around 60% of economic output, declined 0.8% from the previous quarter. At the same time, demand from overseas shaved 0.3 percentage point off GDP as exports to Asia and the US slid. Exports plunged 4.4% over the reported quarter.
Measured on a quarterly basis, GDP growth slid 0.4% in the June quarter, coming in slightly better than analysts' forecasts for a 0.5% contraction, but retreating sharply from the first-quarter expansion of 1.0%. The Bank of Japan is currently expecting the nation's economy to grow 1.7% in fiscal 2015 and 1.5% in fiscal 2016. However, today's data means the central bank's estimates are unlikely to materialize. There has been little sign the BoJ is considering easing its monetary policy further; however, last October the central bank expanded its QQE programme unexpectedly.
© Dukascopy Bank SA