It was announced on Monday (August 12) that Japan's economy grew an annualised 2.6 percent in April-June, a third straight quarter of expansion but slower than expected, which may heighten calls to delay a planned sales tax hike to ensure the country makes a sustained escape from deflation.
The expansion was smaller than a downwardly revised 3.8 percent increase in the first quarter, when the launch of Prime Minister Shinzo Abe's stimulus policies drove up share prices and led to exceptionally strong personal consumption.
The Nikkei 225 share average fell to a six-week low on the weaker than expected data, at 13514.62 down 100.57 in morning trading.
The reading compared with a median market forecast for a 3.6 percent increase. Capital expenditure unexpectedly fell, a sign companies are yet to boost spending despite the feel-good mood generated by Abe's reflationary policies.
Japan is due to raise its 5 percent sales tax rate to 8 percent next April and then to 10 percent in October 2015, as part of efforts to curb its massive public debt.
The GDP data may weaken the case for Abe to go ahead with the tax hike, as sources said he is worried it may dampen spending and delay Japan's escape from deflation
BOJ Governor Haruhiko Kuroda has said the tax hikes are needed. At more than twice the size of its 500 trillion yen economy, Japan's debt is proportionally the largest among major industrialised nations.
Government officials have said the preliminary GDP data and revised figures due on September 9 would be key factors in the tax debate, with a final decision possible by early October.
Presented by Adam Justice