Monday, August 17, 2009

Year-long contraction

The rebound in the world's second-largest economy came after a steep, year-long contraction in gross domestic product, including a worst-ever drop in the final quarter of 2008, when the economy shrank at a 13.1 per cent pace.

The news from Japan comes amid signs that the global economy may be recovering from its slump. Last week, France and Germany, Europe's two biggest economies, said they resumed growing in the second quarter, while Hong Kong also said it expanded after a year-long recession.

But Japanese stocks fell Monday on concerns about weak U.S. consumer sentiment that could mean bad news for Japan's export-driven economy. The Nikkei 225 was down 2.2 per cent at 10,360.25 by midday.

Economy and fiscal policy minister Yoshimasa Hayashi warned that "risk factors" remain, including high unemployment and sluggish production.

"Production is still at a low level, and worries remain that employment conditions will worsen. So we must watch the downside risks," he said.

Private capital investment slid 4.3 per cent from the previous quarter, while housing investment plunged 9.5 per cent, the government said.

Compared to the previous quarter, Japan's GDP expanded 0.9 per cent in April-June. If that rate were maintained for a full year, the economy would grow 3.7 per cent.

That was better than the three per cent rate projected by the Economic Planning Association, a government-affiliated group of economists.

Also Monday, the government said in revised data that the economy had contracted 3.2 per cent in the fiscal year through March 31, following 1.8 per cent growth in the previous fiscal year, ending March 2008.

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