Japan’s GDP shrinks by 1.6 percent in Q2

Housing investments saw a second straight quarter of growth with a rise of 1.9 percent, indicating an end to the dip in demand when households rushed to make purchases before the consumption tax rate increased.

Japan’s economy contracted 0.4 percent – or at an annualized pace of 1.6 percent – in the April-June quarter, official data showed Monday.

Weather may have played an important role in the weaker growth, as heavy rains in the spring and early summer discouraged consumer spending, Masamichi Adachi of JPMorgan said in a research note.

Capital investments, which grew by a healthy 2.8 percent in the January-March quarter, posted their first negative figure in three quarters with a 0.1 percent decline.

Overseas demand shaved 0.3 percentage point off growth as exports to Asia and the United States slumped.

Many analysts say weak GDP data alone won’t trigger an immediate monetary easing.

That was down from an earlier estimate of 2.0 percent and 0.8 percent, respectively.

Lagging exports and sluggish consumer spending were the biggest contributors to the drop in growth.

He also suggested that there was no need for the government to compile additional stimulus measures at present and denied speculation that they were looking to engineer a decline in the Japanese yen to boost the nation’s trade-exposed sectors.

Prime Minister Shinzo Abe’s ruling Liberal Democratic Party won an overwhelming victory in parliamentary elections for the powerful lower house in December as he vowed to reboot the world’s third-largest economy.

Economists are more optimistic about the second half of the year.

Mr Amari attributed the poor performance of exports to disappointing sales to China and the US.

Amy Yuan Zhang, of Nordea, said that the only way that target could be met would be by ramping up Japan’s quantitative and qualitative easing (QQE), pushing down the yen and raising import prices.

But economists have already sharply cut their growth forecasts for the current fiscal year on expectations of a big contraction in April-June, and expect the BOJ to do so too when it reviews its long-term projections in October.

While he said that the U.S. economy was recovering and he didn’t see much reason to be anxious on that front, he added that he was watching how China responded to its slowing economy, Reuters reported.