Japan’s economy grew at a slower-than-expected rate in the second quarter, offering ammunition to those seeking to delay a scheduled sales tax increase even as government debt has risen past 1,000 trillion yen (HK$80.1 trillion).
Capital expenditure unexpectedly fell for a sixth straight quarter, a sign that companies are yet to boost spending despite the feel-good mood generated by Prime Minister Shinzo Abe’s reflationary policies over the first half of this year.
The world’s third-largest economy grew an annualised 2.6 per cent in April-June, a third straight quarter of expansion but below both a forecast of 3.6 per cent growth and a downwardly revised 3.8 per cent rate in the first quarter.
“Private consumption came out stronger than expected but capital spending and inventory disappointed,” said Takeshi Minami, chief economist at Norinchukin Research Institute.
“Growth above 2 per cent is still considered high, so it wouldn’t lead to a complete postponement of the sales tax hike. But the government could make tax hikes more incremental, without delaying the timing.”
The Nikkei 225 share average fell to a six-week low on the weaker than expected data, with analysts saying confidence was hit by the combination of weak capital spending and the expected sales tax increase affecting consumption.