Japan GDP shrinks slower-than-expected 1.3 percent

Japan's economy shrank at a slower-than-expected 1. 3 percent annual pace in the April-June period for the third straight quarter of decline, the government said Monday. The contraction was much smaller than a revised 3.6 percent annualized drop in the previous quarter, indicating that the nation's economy has the strength to bounce back from a slump following the March 11 earthquake and tsunami, according to preliminary data released by the Cabinet Office. On a quarterly basis, the gross domestic product (GDP) declined 0.3 percent in the three months ended June 30 from a revised 0.9 percent drop in the the January-March period. Personal consumption, which accounts for about 60 percent of Japan's GDP, fell a real 0.1 percent from the previous three months. Business investment, another key pillar of domestic demand, rose 0.2 percent. But exports, one of the key engines of nation's economic recovery, shrank 4.9 percent from the previous quarter, the biggest drop since the first quarter in 2009. The GDP deflator, a gauge of overall price movements, dropped 1.1 percent from the previous quarter. "The fall in the second quarter was due to the negative impact by the March 11 earthquake and tsunami. Today's data show that supply constraints are improving and the economy is picking up," Economic and Fiscal Policy Minister Kaoru Yosano told a press conference after the Cabinet released GDP data. "We expect relatively high GDP growth later this year in the second half of this year, thanks to reconstruction demand in the quake-hit areas," said Yosano. However, the minister voiced concern over the recent yen's strength in the currency market. With a one-yen rise against the dollar, Japanese companies would lose tens of billions of yen earned overseas when repatriated. The government will also closely monitor the affects of power shortages on businesses and slowing overseas economies, he added. The magnitude 9.0-earthquake and tsunami on March 11 left nearly 21,000 people dead or missing, and crippled the Fukushima Daiichi nuclear plant. The twin disaster also destroyed many factories in northeastern Japan and caused nationwide parts supply problems, especially for automakers. GDP is the total value of goods and services produced domestically. Real GDP is adjusted for price and seasonal variations.