TOKYO: Japan's economy stalled in the April-June quarter, data showed Monday, missing market forecasts and rekindling worries about the government's faltering bid to stoke a recovery.
Growth in the world's third largest economy was flat at 0.0 percent on-quarter, falling below economists' expectations for a modest 0.2 percent expansion, as weak exports and a fall in business spending dented activity.
On an annualised basis, the economy expanded by a slight 0.2 percent in the latest period, well off expectations for a 0.7 percent rise and a 1.9 percent growth rate seen in the first quarter of the year.
Japanese officials are under growing pressure to deliver as economists increasingly write off Prime Minister Shinzo Abe's years-long bid to cement a lasting recovery, dubbed Abenomics.
"Today's data are quite disappointing," said Junko Nishioka, chief economist at Sumitomo Mitsui Banking.
"The situation is becoming tougher and tougher. There is the rally in the yen and worries about Japan's prospects in overseas markets. And so companies are becoming more pessimistic about making investments."
Inflation dropped for a fourth straight month in June, delivering a fresh blow to Abe's war on deflation.
Business confidence has slumped to levels last seen when he swept to power in late 2012 on a ticket to fire up an economy beset by years of falling prices and weak growth.
Tokyo recently announced a whopping 28 trillion yen ($276 billion) package aimed at kickstarting growth, after Britain's June vote to quit the European Union sent financial markets into a tailspin and sparked a yen rally.
The second quarter drop in business spending comes as the strong yen threatens corporate Japan's bottom line -- aggravating broader concerns about growth.
Investors tend to buy Japan's currency as a safe bet in times of turmoil or uncertainty.
But it makes its exporters less competitive overseas and hits profits at Japan Inc.
The problem was highlighted recently as many of the county's best-known firms, including Sony and Toyota, reported lower profits in the three months to June.
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