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August 15, 2010    

Japanese growth expected to moderate in Q2

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by Kay Murchie
Japanese growth expected to moderate in Q2

Official figures out tomorrow are expected to reveal growth in the world’s number two economy slowed in the April to June period.

Japan fell into a severe recession following the global financial crisis but was one of the first major economies to emerge from recession – in the second quarter of 2009 - boosted by exports.

However, demand for exports is expected to weaken - due to a stronger yen.

A median forecast of economists polled by Dow Jones Newswires believe the economy will record annualised growth of 2.3% - significantly less than half the 5% level experienced in the previous quarter.

The figures could mean that China will overtake Japan and become the world’s second largest economy.

Meanwhile, the latest figures from the Japanese finance ministry revealed exports continued to rise in June, albeit at a slower pace.

Exports grew 27.7% to 5.87 trillion yen in June – the seventh straight monthly rise.

However, not only did the figure fall short of expectations of a 23.1% rise, it was also below May’s increase of 32.1%.

Meanwhile, the yen hit a 15-year high against the US dollar last week - fuelling concerns about the impact on exporters.

Furthermore, the economy continues to battle with deflation.

Deflation (where prices fall rather than increase) can be a serious threat to an economy because it deters consumers and businesses from spending in expectation of falling prices.

Deflation was a problem for Japan during its so-called “Lost Decade” in the 1990s in which the economy struggled with falling prices.

In related news, the world’s largest economy, the US, also saw slower growth in the second quarter, down to 2.4% from 3.7% in the first quarter.

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