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Japan's economic growth figure lowered

9 December 09 10:14 GMT

Japan's economy expanded by much less than first estimated in the July to September period, revised official figures have shown.

The economy only grew at an annualised rate of 1.3% during the third quarter, down from the previous estimate of 4.8%, said the Cabinet Office.

The main reason for the change was a sharp downward revision in the amount companies had invested in new assets.

The figures come a day after the government agreed a new stimulus deal.

The recently elected government of Prime Minister Yukio Hatoyama said it would spend 7.2 trillion yen ($81bn; £48bn) on measures to bolster employment, extend incentives for energy efficient products, and provide loan guarantees to help small and medium-sized businesses.

The previous government had unveiled a similar 15.4tn yen economic stimulus package in April.

Deflation worries

Compared with the preceding quarter, the Japanese economy expanded by just 0.3% between July and September, down from an initial estimate of 1.2%.

The Cabinet Office said the main reason for the economy-wide fall was capital investment by companies - the amount they spend on new assets - being revised down for the quarter to a contraction of 2.8%, from the original estimate of 1.6% growth, in the face of the stronger yen.

The yen recently hit a 14-year high against the dollar, making Japanese exports more expensive in the US.

Japan is also struggling again with deflation, which last month the government said had returned for the first time since 2006.

Deflation means that prices are falling. It is bad for an economy as it puts consumers off from making purchases, leading to a vicious circle of decreased spending and increased unemployment.

Mr Hatoyama admitted on Tuesday that the Japanese economy still faced challenges, despite exiting recession in the April to June quarter.

"As the Japanese people are already feeling, the economy is not necessarily doing fine," he said.

"I would like to take appropriate economic policies going forward."

Despite the downward revision to the growth figures, Tatsushi Shikano, a senior economist at Mitsubishi UFJ Securities, said he still expected growth to continue.

"Although the third-quarter figures were revised down sharply as expected, I still expect the economy to continue a steady recovery towards next year on the back of a recovery in the global economy," he said.

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