Japan's Economic Slowdown?

13 September 2004

Continuing high oil prices and reduced government spending has led the Japanese administration to revise its annual rate of expansion for the three months to June down from 1.7% to 1.4%.The surprise news dipped the Nikkei 225 index below 11,000.

However the government remained in a buoyant mood with economics minister, Heizo Takenaka maintaining: "There is no need for us to alter our view of the economy."

The second quarter of 2004 sees Japan's three-monthly growth period continue for the fifth time in succession, and marks a definite departure from the poor results of the last decade. Yet the downward revision of the growth trend is creating apprehension.

A major factor in the economic downturn is a 7% drop in government investment from the last quarter, which is an attempt to combat the huge public sector deficit.

A rise in unemployment and an 11.3% fall in July of machinery orders only adds to the financial fears, prompting director of economic and market analysis at Nikko Citigroup, Kisha Murashima, to claim: "It's worse than expected, and combined with the very disappointing machinery orders ... I am worried about the outlook for the July-September quarter."

Data sourced from: BBC Online Business News (UK); additional content by WARC staff