Economic analysts were disappointed on Monday as Japan’s quarterly growth for April-June was reported at only 0.3%, half of what was expected. Now the only thing growing is the concern that consumer spending will continue to be weak in the face the European debt crisis, which is affected demand across the globe in a variety of markets. And with parliament approving the bill to double Japan’s 5% sales taxes by 2015, many are fearing that it won’t take long before spending begins to drop.
The expectations for the nation’s growth were at 0.6%, coming right after the January-March quarter’s 1.3% reported growth, a number that exceeded the expectations for that quarter. Domestic growth is slowing, and that is in direct comparison to weakening exports, most notably to the European markets. Yuichi Kodama, a chief economist for Tokyo’s Meiji Yasuda Life Insurance, says that there is a good chance Japan’s economy will continue to slide during the July-September quarter, and that it won’t take long for Bank of Japan to reverse its decision to hold off further monetary easing.
While the key source for domestic growth during the last quarter was the reconstruction work being done in northern Japan after the earthquake and tsunami disasters, many economists say that is now waning. Hiroshi Miyazaki, with the Shinkin Asset Management Co., says that there will still be plenty of spending on reconstruction, but the profits won’t come nearly as quickly as they did in the first half of the year. Japan’s Minister of Economics, Motohisa Furukawa, simply said about the report that the nation’s economy continues its upward trend, with domestic demand leading the growth, apparently glossing over the seriousness of the situation.