The anemic growth of Japan's economy in the April-June period raises more doubts over Prime Minister Shinzo Abe's signature policies. The Bank of Japan has been resorting to a negative interest rate policy for six months, but the controversial step does not appear to have done much to increase consumer spending or business investments by encouraging more bank lending.
The central bank says it will review the effectiveness of its monetary policies in fighting deflation at its Policy Board meeting next month. Instead of blindly "revving up the engine of Abenomics," the Abe administration should also reflect on its economic policies to see whether they are helping to generate a private sector-driven virtuous cycle of sustained growth.
The nation's gross domestic product was nearly flat from the previous quarter, expanding a minuscule 0.048 percent for an annualized 0.2 percent growth in real terms — compared with an annual 2 percent expansion rate in the January-March period. Consumer spending rose a scant 0.2 percent, while capital investments by businesses fell 0.4 percent for the second quarterly decline in a row. Housing investments rose 5 percent for the first increase in three quarters, while public works spending gained 2.3 percent thanks to the spending in the government's extra budget for fiscal 2015.
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