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Japanese economy almost freezes in Q2 2016

Japanese economy almost freezes in Q2 2016, as gross domestic product rose by 0.2% yoy, compared to growth 2.0% yoy in first quarter. The economists and markets were disappointed, as they expected a growth of 0.7% yoy. Above all, the falling investment prevent the presence of stronger growth. The private consumption expanded by 0.2%. The business investment declined for a second consecutive quarter, while exports collapsed on an annual basis by 5.9%.

The exports of ships, steel products and goods related to oil also decreases, as the US and European demand for Japanese goods weakened during Q2 2016.

Economists forecast export to remain slow, public spending will increased in attempt to support growth. Essentially Japanese growth potential decreases. This means that the government must continue with structural reforms, not only with incentives.

The economic policy of Prime Minister Shinzo Abe is under pressure. Earlier this month, the government presented a huge package to encourage the situation to avoid falling into recession.

Japan has long tried to get out of the period of trickle economy. In addition timid investment and weak private consumption negatively influenced by expensive local currency, which stops exports, as Japanese products more expensive abroad.

A month ago, Japan drastically revised down its forecast for economic growth. For years the country’s economy is suffering from deflation, falling wages and decelerating investment.

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