Japan said today that its economy grew at less than half the pace previously reported in the third quarter as falling domestic demand sapped momentum from the world's number two economy.
Gross domestic product grew by just 0.2% in the three months to September from the previous quarter, down from an initial estimate of 0.5% and the second quarter's 0.3% growth, the Cabinet Office said. Asia's largest economy grew by 0.8% on an annualised basis in the third quarter, also much slower than the 2% preliminary estimate.
Weaker-than-expected corporate capital investment was another reason for the downgrade as firms ploughed less money than initially thought into new factories and equipment.
Domestic demand fell by an annualised 1%, leaving exports as the main driver of growth and the economy thereby vulnerable to a slowdown in the US and Japan's other major trading partners, analysts noted.
After years of stagnant growth and on-off recessions, Japan is now in the midst of its longest sustained expansion since World War II, the government said last month. But growth has slowed from the heady pace of the start of the year and the economy appears to be taking longer than expected to ecisively exit deflation, with core consumer prices up just 0.1% in October from a year earlier.
Even so markets are braced for the Bank of Japan to raise interest rates to 0.5% either later this month or in early 2007 - the first hike since July when the central bank ended over five years of zero rates.
