Japanese economy shrinks 1.3 per cent in June quarter

TOKYO/NEW DELHI: Japan's economy contracted by 1.3 per cent in the three months ended June, much less than expected, indicating that the island nation is on the road to recovery after a devastating tsunami in March.

The world's third-largest economy, which is also grappling with an appreciating yen and sluggish exports, was widely expected to shrink by over 2 per cent in the June, 2011, quarter.

Japan's GDP declined by 1.3 per cent in the three months ended June, 2011, according to figures released by the Japanese Cabinet Office today. The less-than-expected economic contraction was mainly on account of better consumer spending.

Devastated by twin natural disasters -- an earthquake and tsunami -- in March, there were large scale production disruptions at various Japanese companies in subsequent weeks.

With the latest contraction of 1.3 per cent, the Japanese economy has shrunk for three straight quarters.

The national GDP fell by 0.9 per cent in the March, 2011, quarter after shrinking by 0.6 per cent in the last quarter of 2010.

Nevertheless, the better economic reading from Japan boosted Asian stock markets today. Most of the key indices, including Japan's Nikkei 225, China's Shanghai Composite Index and Hong Kong's Hang Sang closed in the green.

Stock markets worldwide were rattled last week amid mounting concerns about the health of American economy as well as the escalating European debt turmoil.