Japan economy shrinks faster as spending is cut

Japan's tsunami-struck economy shrank in the second quarter at a faster pace than initially reported as companies held back on capital expenditure due to worries about a rising yen and faltering global growth.

Economists say Japan is likely to resume growing in the third quarter after three consecutive quarters of contraction, boosted by a rapid recovery in supply chains following the March 11 earthquake, but the outlook further ahead looks increasingly in doubt.

Other data pointing to weak business investment and a dip in exports suggest Japan will not be able to rely much on external demand. This could pressure the government to speed up reconstruction spending and lean on the central bank to weaken the yen.

Gross domestic product shrank a revised 0.5%, compared with the initially reported 0.3% contraction.