Staff Writer
Columbus CEO

c.2013 New York Times News Service

TOKYO — Prime Minister Shinzo Abe of Japan is now under more pressure to deliver on his much-promoted effort to improve the country’s long-term growth prospects, after a government estimate on Thursday showed that the economy had slowed in the quarter that ended in September.

Recent delays on measures that would liberalize Japan’s labor market or level the playing field for Internet-based startups have raised questions about how committed Abe remains to his proposals, especially when they encroach on powerful vested interests.

According to the preliminary figures released Thursday by the government’s Cabinet Office, exports and consumer spending displayed signs of weakening after strong overall growth in the first half of the year. Japan’s gross domestic product slowed to an annualized rate of 1.9 percent in the quarter, down from 3.8 percent in the previous quarter. Growth had benefited from a bold monetary and fiscal push by Abe’s government to stimulate the economy.

The government estimate exceeded the average rate of 1.6 percent predicted by economists polled by Nikkei. The economists also forecast that growth would pick up somewhat in the fourth quarter. Still, the slowdown takes some of the shine off what had been a bright spot for an otherwise lackluster year for the global economy. On a quarterly basis, the Japanese economy grew 0.5 percent from the previous three months.

“The break from rising share prices appears to have hurt consumer sentiment,” Akira Amari, the minister for economic revitalization, said at a news conference after the release. “Looking forward, I hope domestic demand holds up to bring about a more certain recovery,” he said.

A breather from the feverish stock market rally that hit Tokyo in the first half of the year has slowed luxury purchases. More worrisome, companies have hesitated to start raising wages despite a rebound in their profits, a reluctance that Abe has taken to complaining about. A drop in private consumption to 0.1 percent growth, down from 0.6 percent in the previous quarter, was also behind the decline, the Cabinet Office figures showed.

Another reason for the slowdown was a drop in net exports. Ever since Japan was effectively forced to close its nuclear reactors after the Fukushima disaster in 2011, its costs for importing energy have soared, hurting its balance of trade. Exports to Asia slowed amid concerns about growth in the region. Imports grew 2.2 percent in the latest quarter, while exports fell 0.6 percent.

A surge in smartphone shipments to Japan also made a dent in the trade balance. The popularity in Japan of Apple’s new iPhone 5S is most likely behind that jump in shipments, Kyohei Morita, chief economist at Barclays, wrote in a report this week.

There were some positive signs for growth, including a 2.7 percent jump in housing investment, as Japanese consumers raced to make big-ticket purchases before a planned rise in the national sales tax in April. Corporate investment rose 0.2 percent, while government spending jumped 6.5 percent, as Abe continued to buttress monetary easing with fiscal stimulus.

Marcel Thieliant, an economist at the research firm Capital Economics in London, said that the Japanese economy was likely to regain momentum in the near term, and that the real worries would come after the tax increase.

“An acceleration in growth towards year-end and potentially into 2014 looks likely as spending is brought forward, but demand will surely slump in the second quarter despite the recently announced fiscal stimulus measures,” he said in a note to clients after the data release.

Any further slowdown could move Japan’s central bank to expand its already aggressive easing program. Haruhiko Kuroda, the Bank of Japan governor, has promised that he will do “whatever it takes,” especially to cushion the effects of the planned sales tax increase. The government has also promised a spending package of 5 trillion yen, about $50 billion, to ease the pain of higher taxes.

There is increasing pressure on Abe to renew his attention to his promised economic overhaul, with some executives saying that the government’s commitment has been slipping.

Hiroshi Mikitani, an e-commerce entrepreneur and early supporter of Abe’s economic policies, assailed the government this week after it fell short on a promise to relax rules that limit sales of over-the-counter drugs on the Internet. The government has also appeared to step back from measures that could bring more fluidity to Japan’s rigid labor market. At the same time, Tokyo’s negotiations over an emerging Pacific trade pact led by the United States remain fraught, with opposition from an influential farming bloc.

The consequence of relaxed rules for online drug sales is not huge, but a dispute over those rules between a powerful lobby of brick-and-mortar pharmacies and online newcomers like Mikitani’s Rakuten mall has come to symbolize a wider battle to inject more competition into the Japanese economy.