Japan on path to recovery after quake crisis

City A.M. Reporter
Japan's economy shrank much less than expected in the second quarter as companies made strides in restoring output after the devastating earthquake in March, but a soaring yen and slowing global growth cloud the prospects for a sustained recovery.

Analysts expect the world's third-largest economy to rebound in July-September, probably expanding at the fastest rate among major industrialised nations as exports and factory output return to pre-disaster levels. But growing risks to this scenario could strain a depleted arsenal of policy tools.

Gross domestic product fell 0.3 per cent in the second quarter, less than a median forecast for a 0.7 per cent contraction and a 0.9 per cent decline in January-March.

The better-than-expected reading helped push up the Nikkei benchmark .N225 by about one per cent, which has also tracked gains in global markets last week supported by a short-selling ban on financial stocks in Europe.