TOKYO—Japan posted significantly lower-than-expected second-quarter gross domestic product growth, prompting serious concerns about the health of the economy as China surpasses it in size.
Japan’s real domestic gross profit grew just 0.4 percent on an annualized basis in the April to June period, the Cabinet Office said Monday. The economy advanced just 0.1 percent from the previous quarter.
Chiwoong Lee, an economist with Goldman Sachs in Tokyo, said the market was anticipating growth of 2.3 percent for the quarter and noted that the reported figures are even weaker than they initially appear because first-quarter growth was revised downward to 4.4 percent from 5 percent.
“We expect GDP growth to remain sluggish,” Lee said, explaining that consumption is set to weaken as government stimulus measures fade out while exports and capital expenditures are seen slowing.
“The positives we see are a bottoming out in private-sector housing investment with support from the new housing eco-points program and continuing growth for exports, albeit slower than before,” the economist said.
In terms of nominal GDP, which is not adjusted for prices, it shed 0.9 percent in the quarter. Using this calculation, China’s economy was actually larger in the April to June period and some observers believe China will surpass Japan in terms of full-year GDP this year.
Japan’s private consumption was flat in the second quarter, down from 0.5 percent growth in the first quarter. Those figures come as the nation’s retailers struggle to convince consumers to part with their money.
Meanwhile, the strength of the yen is prompting additional fears. Japan’s economy is heavily dependant on exports, particularly of cars and electronics, and a strong currency reduces the country’s competitiveness.
The dollar is hitting record lows and is currently trading at about 85.86 yen.
Japan’s Nikkei 225 shed 0.94 percent in its morning session.