By The Associated Press filed 8:20
TOKYO (AP) -- Japan's economy shrank more than expected in the July-September quarter after two quarters of expansion, the government said Monday, dealing a blow to the country's hopes of emerging from its worst economic slump in decades.
The country's gross domestic product contracted 1.0 percent in the three months that ended Sept. 30, the Economic Planning Agency said.
A downturn was expected as the effect of government spending measures wear thin and consumer spending remains stagnant, but it was much larger that the 0.1 contraction predicted by economists surveyed by Dow Jones Newswires.
Japan's strong economic performance in the last two quarters had raised hopes that Prime Minister Keizo Obuchi would be able to fulfill his promise of delivering 0.5 percent growth in this fiscal year, which ends in March.
GDP is the value of goods and services produced within the country.
The economy grew by 0.1 percent in April-June, after surging 2 percent in January-March.
Despite the grim economic data, Japan's benchmark stock index rose sharply, gaining 1.4 percent in the first half-hour of trading. Analysts said investors were prepared for an economic contraction.
Before the announcement of the GDP data, economic planning chief Taiichi Sakaiya said second quarter growth would be ``difficult' but that the government was confident that it could engineer growth this year if the contraction was smaller than 0.5 percent.
At an annual pace, Japan's economy shrank 3.8 percent in the quarter.
Last month, Japan's Cabinet announced a plan to take on a record amount of debt to help finance a $172.5 billion supplementary budget to boost the economy.
The package is aimed at helping Japan's economy grow this fiscal year for the first time in three fiscal years, but it has raised fears that it will merely add to the budget deficit without sparking the consumer and corporate confidence needed for a real economic recovery. |
