Weakness in the global economy and worsening trade protectionism have emerged as risks to growth and added some pressure for the Bank of Japan (BOJ) to expand stimulus when it meets next week.
The economy grew an annualized 1.3% in April-June, revised Cabinet Office data showed Monday, weaker than the preliminary reading for 1.8% annualized growth and in line with economists’ median forecast.
The annualized growth rate translates into a quarter-on-quarter expansion of 0.3% from January-March, compared with a preliminary reading for a 0.4% gain.
“There’s a possibility growth will turn negative in the October-December quarter,” said Izuru Kato, chief economist at Totan Research.
“If worries about such negative growth deepen (in the coming months), the Bank of Japan could consider lowering interest rates further into negative territory.”
Capital spending rose just 0.2% from the previous quarter, much lower than a preliminary 1.5% rise and the median forecast for a 0.7% increase.
Stefan Angrick, senior economists at Oxford Economics, said manufacturers cut spending in the quarter amid a re-escalation in U.S.-China trade frictions.
“While investment by non-manufacturers, particularly software-related, maintained robust growth, it was not enough to completely offset the contraction in spending by manufacturers,” Angrick said in a note.
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