Japan GDP Data Are Revised for 2nd Quarter

Japan revised its gross domestic product data for the April-June quarter Monday to show a slightly smaller contraction, but the figure offered little relief after last week’s bleak official full-year forecast.

April-June GDP shrank by a real 0.7% from the previous quarter, rather than by 0.8% as in the initial estimate, the Cabinet Office said.

The revised GDP figure represented an annualized contraction of 2.9%, compared with a 3.2% shrinkage in the initial estimate.

An official at the Cabinet Office said the slightly better GDP figure was owing to the fact that capital spending was revised upward to minus 2.4% from minus 2.8% as more data in the financial and insurance sectors became available.

“As the headline figure shows, it really is a minor change,” said Takehiro Sato, economist at Morgan Stanley in Tokyo.

“The changes in the components [of GDP] are a result of newly added data replacing projections. So there is no real change.”

The revision comes only days after Friday’s government report in which official forecasters projected a 0.9% GDP contraction in the current fiscal year that ends next March, its worst contraction in at least 20 years.

And the revised April-June GDP figure still represents the biggest economic shrinkage ever in nominal terms, with a drop of 2.6% quarter-on-quarter, or an annualized 10.1%.

Some economists and politicians say this nominal figure should be the focus as long as the economy continues to suffer from deflation.

The Cabinet Office said that in order to achieve the full-year projection, GDP contraction in each of the following three quarters must be reduced to 0.4%.

Prime Minister Junichiro Koizumi’s Cabinet approved a draft supplementary budget last week in an effort to support the flagging economy, which is almost certainly in its fourth recession in a decade.

Budget committees of the Lower House and the Upper House begin deliberations on it this week.