Japan’s growth slower than expected

Japan's economy expanded at a slower pace than most analysts expected in the second quarter, BBC News reported.

Gross domestic product grew 0.6% in the April to June period, indicating an annualised increase of 2.6%, according the latest government figures.

That is down from the 4.1% annual rate in the first three months of the year. Analysts were expecting growth of 3.6%.
Japan's Prime Minister, Shinzo Abe, has been trying to revive the economy after years of stagnation.

His policies, known as Abenomics, include boosting the supply of money in the economy and raising government spending.
So far those moves have helped to weaken the yen and boost profits for Japan's exporters.

Monday's data from the Cabinet Office showed that exports and public spending contributed the most to growth.

It is the third quarter of expansion for the Japanese economy.

However, investments made by businesses declined.

"The results show that 'Abenomics' has succeeded in boosting consumer sentiment and spending but it has yet to encourage companies to spend more and raise wages," said Takeshi Minami from Norinchukin Research Institute Tokyo.

"As such, it remains unclear if growth could be sustained in the long run."

The worry is that one of the the aims of Abenomics is get consumer prices rising again as it encourages business and people to spend. However, if wages do not keep pace then household incomes will not rise.

The figures out Monday were being closely watched because Mr Abe had indicated that a controversial sales-tax hike decision would be linked to them

Japan is expected to raise its 5% sales tax to 8% next April and then to 10% in October 2015, as it looks to curb is huge public debt.

Some analysts said Monday's figures will make it harder for Mr Abe to go ahead with the tax hike as many worry it could dampen spending and delay Japan's emergence from deflation or falling prices.

Mr Minami pointed out though that anything above 2% growth is still considered high and could therefore mean the sales-tax hike does go ahead.