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