Japan's economic growth ground to a halt in April-June as weak exports and shaky domestic demand prompted companies to cut spending. As Sonia Legg reports, it's put fresh pressure on premier Shinzo Abe to come up with policies that will produce more sustainable growth.
Top marks for effort maybe but 'could do better' when it comes to results. Japan's economic growth virtually ground to a halt in the second quarter at just 0.2 percent. Weak exports and shaky domestic demand prompted companies to cut spending. That's despite Prime Minister Shinzo Abe's attempts to end decades of deflation with massive stimulus programmes. (SOUNDBITE) (English) GLOBAL MARKET STRATEGIST, JP MORGAN, ALEX DRYDEN, SAYING: "The Bank of Japan is the top 10 shareholder in 90 percent of Japanese listed firms and they already own 40 percent of Japanese government bonds so there is only a certain amount it can do." The government insists there are mitigating circumstances, particularly when it comes to private consumption which accounts for 60 percent of GDP. (SOUNDBITE) (Japanese) JAPAN'S ECONOMY MINISTER, NOBUTERU ISHIHARA, SAYING: "There was an extraordinary factor, the Kumamoto earthquake happened during the same period as the Golden Week holidays. It caused the consumer mind to stall, and the tourism industry in Kyushu fell with a thud." Weak global demand is also a problem for an export-reliant economy, although housing investment - up 5 percent - offered a glimmer of hope. And the stimulus could yet improve Japan's grades, particularly if combined with structural reforms. (SOUNDBITE) (English) GLOBAL MARKET STRATEGIST, JP MORGAN, ALEX DRYDEN, SAYING: "That would be an area that I would focus on if I were Abe - trying to work with his political partners to try and improve the flexibility in the labour market, encourage more women to get into work and improve trade protection within Japan." The Bank of Japan is assessing its class work so far and could still do more But it's E for attainment when it comes to the 2 percent inflation target - prices continue to fall.