Economic growth in Japan weakened significantly in the last financial quarter, official figures show. Between April and June this year gross domestic product - the sum of the nation's goods and services - grew 0.1%, much lower than expected. Analysts said the country's export-led recovery appeared to be faltering as the value of the yen appreciates.
Japan's close rivals, Germany and the US, recently posted far superior GDP figures for the same period. Germany registered a 2.2% rise, while the US had growth of 2.4%. The BBC's Roland Buerk in Tokyo says Japan remains one of the wealthiest and most prosperous countries in the world, but the trajectory of its economy has been clear for years. World Bank figures show that in the first eight years of this century Japan's economy expanded by just 5% while China's grew by 261%.
Japan has relied on exports for growth, but the problem is that the yen has been rising, making Japan less competitive abroad, our correspondent says. The yen hit a 15-year high against the US dollar last week - adding to worries about the impact on exporters. After the GDP figures were released, Economics Minister Satoshi Arai said that the government needed to work with the Bank of Japan to respond to the rising yen.
Analysts say Japan may have to take action to lower the yen's value against other major currencies. "The yen's rise may begin to hurt export growth in the latter half of the current fiscal year," said Norinchukin Research Institute economist Takeshi Minami. "I think the Bank of Japan and the government need to take decisive action against currency moves." The GDP figures give further credibility to the widely held belief that China will soon overtake Japan as the world's second biggest economy.
That will become clearer early in 2011, when GDP figures for the whole of 2010 become available for each country. Weakening exports are not the only problem confronting Japan. Prime Minister Naoto Kan recently said Japan was "at risk of collapse" under its huge debts. And the domestic market is slow, with the price of goods is falling. The country's central bank has already announced a scheme to offer 3tn yen in low-interest loans in an effort to spur economic growth.
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