World Economy

Japan Economy to Grind to a Halt in 2Q

Japan Economy to Grind to a Halt in 2QJapan Economy to Grind to a Halt in 2Q

Japan’s economy is slowing to a halt this quarter, JPMorgan Chase & Co. said Friday, cutting its growth estimate on a drag from trade and weaker-than-expected consumer spending.

The world’s third-biggest economy will mark zero growth in the three months through June, JPMorgan economist Masamichi Adachi said in a report, lowering a previous forecast for an annualized expansion of 1.5%, Bloomberg reported.

“Incoming hard data related to consumption have been consistently weaker than our expectation,” Adachi wrote. A “large” decline in Japan’s net trade reported last week also dimmed his estimate for growth in the quarter.

The rebound in household spending last month only partly reversed a drop in April and was weaker than expected, Adachi said. The soft consumption comes as companies are working off an inventory buildup that helped to drive faster growth in the first three months of the year, pressuring industrial output.

“We still expect that the consumption will strengthen in summer, particularly with the expected rise in summer bonuses, which are paid mainly in June. Still, our confidence to the strength of consumption is now lower than before,” Adachi said.

Japan’s economy is still weighed down by a sales-tax increase last year, which triggered a recession. A survey of economists by Bloomberg points to 1.4% growth this quarter, following a 3.9 percent expansion in the first three months of the year.

Even if spending continued to rise by another 2% in June from the previous month, private consumption may have stagnated this quarter, according to Marcel Thieliant, an economist at Capital Economics.

“With increasing signs that the economic recovery is faltering, we think the BOJ will have to step up the pace of easing before too long, perhaps as soon as October,” Thieliant wrote.