Japan’s economy shrank in the second quarter of the year, marking a setback for the governments’s reform policy.Between April and June, economic growth contracted by 0.4% compared to the first three months of the year.

Japan hit by weaker economic growth

Lagging exports and sluggish consumer spending were the biggest contributors to the drop in growth.

It is likely to put pressure on Prime Minister Shinzo Abe to revamp his reform programme of monetary and fiscal stimulus to boost growth.

Annualised, Japan’s economy shrank at a pace of 1.6% for the quarter, following a revised expansion of 4.5% in the first quarter, official data showed on Monday.

Doubtful outlook

Japanese Economics Minister Akira Amari said the GDP contraction was due to weak exports to China and the US as well as poor consumer spending due to bad weather.

The disappointing economic growth follows a recent run of weak data including exports and factory output, raising doubts about the outlook for the rest of the year.

In July, the International Monetary Fund had warned Tokyo, not to rely too much on the weak yen for long term recovery.

Tokyo’s reform efforts, dubbed Abenomics, were kicked off in 2012 and were aimed at getting Japan’s economy out of deflation, and back in to growth.

While the programme is credited with having achieved short-term growth, the government has struggled to deregulate the job market and open up some of the country’s very protected industry sectors.

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