Japan's economy grew an annualized real 4.8 percent in April-June, revised down from 6.0 percent reported earlier, hurt by weak capital spending and private consumption, the Cabinet Office said Friday.
Real gross domestic product, adjusted for inflation, increased 1.2 percent from the previous quarter, compared with the preliminary reading of 1.5 percent. GDP is the total value of goods and services produced in a country.
The world's third-largest economy expanded for the third straight quarter. But economists warn that the state of the economy is not as good as the headline figure suggests due to the relative weakness of domestic demand.
"The drop in capital spending was far bigger than we had expected. In addition, the pickup in private consumption that was supported by catch-up demand appears to be running its course. Consumers are increasingly feeling the effects of rising prices," said Yuichi Kodama, chief economist at Meiji Yasuda Research Institute.
Capital investment declined 1.0 percent, revised down from a 0.03 percent increase.
Private consumption, which accounts for more than half of GDP, fell 0.6 percent, revised downward from the 0.5 percent drop reported last month.
Slowing growth in China-bound shipments is raising concern about the Japanese economy, adding to the negative impact of aggressive interest rate hikes in the United State and Europe to fight surging inflation by curbing demand.
In the revised data, growth in exports was downgraded to 3.1 percent from 3.2 percent. Imports dropped 4.4 percent, compared with the initial 4.3 percent.
"If exports to the U.S. and European markets slow, this will be negative for the Japanese economy and raises the possibility that companies will revise down their bullish investment plans," Kodama said, expecting negative GDP growth for the July-September quarter.
The easing of semiconductor shortages has allowed automakers to ramp up production, leading to increased auto exports to major markets like the United States.
A return of inbound tourism that had been hit hard by COVID-19 travel restrictions has continued to give the Japanese economy a boost as spending in Japan by foreign visitors is counted as exports in the GDP data.
Like other advanced economies that have emerged from the shocks of the COVID-19 pandemic, Japan has seen a cost-of-living crisis. Real wages have been falling for months as inflation, driven largely by high import costs, remains elevated, in a blow to Japanese households.
Prime Minister Fumio Kishida is aiming to compile fresh economic measures to alleviate the pain of rising prices felt by households. The government has decided to extend subsidies beyond this fall to lower gasoline prices whose climb is partly blamed on a weaker yen that has inflated the prices of imported crude oil.
Government subsidies have helped reduce some inflationary pressures but the country's inflation rate has stayed above the Bank of Japan's 2 percent target for more than a year, complicating the central bank's efforts to justify its view that inflation will slow in coming months and therefore monetary easing should be in place.
Nominal GDP growth in the quarter was revised to 2.7 percent, down from 2.9 percent. On an annualized basis, the economy grew 11.4 percent, slower than the previously reported 12.0 percent.
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