Page last updated at 03:34 GMT, Thursday, 11 June 2009 04:34 UK

Japan GDP shrinks at record pace

by Roland Buerk
BBC News, Toyko

Japanese shoppers walk through the Shibuya district of Tokyo
Japanese shoppers are spending less

Japan's economy shrank less than previously thought in the first three months of the year, but still contracted at a record pace.

Gross domestic product - the sum of the nation's goods and services - shrank by 3.8%, equivalent to 14.2% over a year.

Earlier it was estimated at 4%, but there have been brighter signs in recent weeks.

Japan has been hit hard by the global downturn because it relied on consumers abroad to buy its cars and electronics.

People in Japan are starting to hope that the worst might be over.

The Government now says in the first three months of the year the economy shrank by 3.8%, less than was earlier estimated but still the worst on record.

The reason for the revision is that capital expenditure - spending on factories and equipment - was cut by less than had been previously thought.

Modest growth?

In this quarter the world's second largest economy is forecast to grow modestly.

Firms are benefiting from increasing demand from China where the Government is spending nearly $600bn (£365.5bn), some of it on infrastructure.

And massive stimulus measures by Japan's Government, including cash handouts, are starting to have an effect.

But Japan's exports are still around a third lower than a year ago and factories are being run far below full capacity.

If companies continue to cut jobs and investments it could cause a fragile recovery to stall.

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