TOKYO (AFP) – Japan's economy is recovering more slowly than previously thought from its worst recession on record, hobbled by stubborn deflation and weak domestic demand, government data showed Thursday.
The world's number two economy expanded at a pace of 0.9 percent in October-December from the previous quarter, revised down from an initial estimate of 1.1 percent growth, the government said.
Gross domestic product (GDP) grew at an annualised pace of 3.8 percent in the fourth quarter, less than the 4.6 percent previously thought.
The downgrade was partly due to weaker-than-expected investment in factories and equipment by companies struggling to recover from a profit slump triggered by a brutal global downturn.
And a new figure for July-September showed a contraction of 0.1 percent, illustrating that Japan's nascent revival stalled in the third quarter.
"Looking back, the recovery was slower than earlier believed," said Hiroshi Watanabe, an economist at the Daiwa Institute of Research.
The economy would continue to recover "at a very slow pace", he said.
"The recovery probably won't stop but it will likely be even slower in January-March or April-June with public works projects cut, the stronger yen eroding export earnings and the global economy showing a slower recovery."
The latest gloomy data will add to government pressure on the Bank of Japan to boost growth-lifting efforts, analysts said.
Japan's economic output dived last year as exports and factory production collapsed in the global financial crisis.
The economy contracted 5.2 percent for the whole of 2009, even worse than an initial estimate of a 5.0 percent decline, the latest figures showed.
While Japan remained ahead of China as the world's number two economy in 2009, the latest figures have brought it closer to losing the position it has held for more than 40 years.
With China expected to enjoy another year of bumper growth in 2010, Japan risks ending this year in third place worldwide as it struggles to cope with renewed deflation and a shrinking population, analysts said.
Japan last year emerged from its worst post-war recession thanks to rebounding exports, much of it to booming China, and on the back of government pump-priming measures at home.
However, deflation is still burdening the economy. Core consumer prices fell 1.3 percent in January from a year earlier, marking the 11th straight month of decline.
Japan's economic growth is likely to slow to 0.4 percent quarter-on-quarter in the January-March period, "but economic recovery will continue", predicted Susumu Kato, chief economist for Japan at Credit Agricole.
The government has ratcheted up the pressure on the central bank to do more to revive the still-feeble economy, and some analysts expect monetary policy makers to expand an emergency corporate funding programme next week.
The independent Bank of Japan has already slashed interest rates to just 0.1 percent and pumped trillions of yen into the financial system.
But it has been criticised by Japan's government for not doing enough to ward off the threat of anotherdeflationary spiral as seen after the country's economic bubble burst in the early 1990s
Source: news.yahoo.com
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