TOKYO (AP) - Japan's economy contracted at a minus 1.2 percent annual rate in the April-June quarter, according to revised data released Tuesday that show persisting weakness in corporate investment is still hindering a recovery.
TOKYO (AP) — Japan's economy contracted at a minus 1.2 percent annual rate in the April-June quarter, according to revised data released Tuesday that show persisting weakness in corporate investment is still hindering a recovery.
The revised growth figure released Tuesday was better than some economists had anticipated. A preliminary estimate last month showed the world's third-largest economy contracting at a minus 1.6 percent annual rate.
But economists said much of the change stemmed from an upward revision in private inventories, and the general trend is weaker than expected. Corporate investment fell 0.9 percent in a much larger drop than the 0.1 percent decline earlier reported.
Still, the higher inventories and a revision in consumer spending to minus 0.7 percent instead of minus 0.8 percent as earlier estimated helped to offset weaker government and corporate investment.
"The details were hardly reassuring," Marcel Thieliant of Capital Economics said in a commentary. He expects growth to be positive but tepid in the current quarter, based on the data seen so far.
Domestic demand was essentially flat in the quarter. On a quarterly basis, the economy contracted 0.3 percent versus the earlier estimate of a 0.4 percent contraction.
The government hopes to boost growth through inflation, but sluggish wages and exports have frustrated that effort.
Employee compensation fell 0.2 percent in April-June.
Japan's fiscal year begins in April, so public spending tends to be highest in the spring, as construction projects resume or get under way. Public investment and private residential investment were the strongest areas of growth in the quarter: revisions to tax laws have led many property owners to raze old houses for reconstruction, helping boost housing starts.
But other areas such as auto registrations and industrial production have been lackluster. And China's slowing growth has also cast a pall on the outlook for exports in coming months.
"We recognize the downside risk to our growth forecast, with continuing disappointing news from Asian neighbors and recent market turmoil," Masamichi Adachi of JPMorgan said in a research note. He said he expects the economy to still recover in the second half of the year.
"In all, we continue to think that domestic demand is firming, but external demand may be weaker than we currently anticipate," he said.
Follow Elaine Kurtenbach: www.twitter.com/ekurtenbach