Japan's current economy can be likened to a patient nearly recovering from illness: He is allowed to go outside the hospital when weather permits, but he is confined to bed again to rest if he is exposed to cold air and feels poorly.
The latest preliminary report on gross domestic product for the April-June quarter shows it to be in just such a weakened state. Although the real growth rate of 1.7 percent in annual terms means that positive growth was achieved for the fifth consecutive quarter, it also marks a large slowdown from the figures of 6 percent to 7 percent posted in the October-December 2003 and January-March 2004 periods. Moreover, the growth fell far below forecasts in the 4 percent range.
Although capital investment barely remained at the same level as in the January-March quarter, the growth rate of consumer spending fell by about a half. In other words, the two engines behind the economy's growth lost steam. As a result, the nominal growth rate was negative for the first time in five quarters.