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Economy

Japan's Q2 GDP revised down to annualized 28.1% contraction

Business investment stalls amid heightened uncertainty

Workers build Toyota cars on an assembly line near Nagoya. (Photo by Koji Uema)

TOKYO -- Japan's economy contracted by a revised 7.9 % in the April-June period compared with the preceding quarter, producing an annualized rate of decline of 28.1%, the Cabinet Office said Tuesday.

A preliminary estimate of a 7.8% contraction had suggested an annualized pace of decline of 27.8%. The revision announced Tuesday factored in new data about business investment.

Companies across all industries reduced capital investment in the second quarter, as they were uncertain about when the economy would return to normal after the coronavirus pandemic.

Economists expected a decline of 8.0%, or an annualized fall of 28.4%, according to a survey by Nikkei affiliate QUICK.

Japan recorded a decline for the third consecutive quarter, and the April-June drop was the country's biggest under gross domestic product data going back to 1955.

The sharp deceleration has surprised many, as the country is thought to have handled the pandemic better than other nations. The U.S., which has amassed over 6 million coronavirus cases compared with Japan's 72,000, reported a 9.1% contraction in April-June, for an annualized drop of 31.7% -- not so different from Japan's decline.

Though Japan's economy is expected to rebound in the third quarter, no return to a pre-pandemic level is seen until the fourth quarter of 2021, economists say. They fear that concerns about a fresh coronavirus outbreak could depress sales at shops and restaurants, causing businesses to put off large investment.

The deep economic slump also is expected to strain government finances, as Japan increases spending to support the economy even as tax revenue plunges.

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