Japan's economy contracted more than the government initially estimated in the second quarter, adding to concern the stronger yen may derail the nation's recovery from the March 11 earthquake.
Gross domestic product shrank at an annualised 2.1 per cent rate in the three months ended June 30, more than the 1.3 per cent contraction reported last month, the Cabinet Office said today in Tokyo. The reading was in line with the median forecast of 21 economists surveyed by Bloomberg News.
Reports in the past week indicate growth in the world's third-largest economy may stall toward the end of the year.
Machinery orders, a leading indicator of capital spending, fell the most in 10 months in July and companies are also struggling with a yen near a postwar record, risking an erosion of oversea profits when they're repatriated.

"Companies were put off from investing given the post- earthquake slump in earnings," Takahide Kiuchi, chief economist at Nomura Securities Co. in Tokyo, said before the report. "Concerns that the economic environment abroad will weigh on the Japanese economy are also increasing."
Japanese Finance Minister Jun Azumi said on Sept. 6 he will appeal to his Group of Seven counterparts about the danger a strong yen poses to the economy. The yen advanced to a postwar high of 75.95 against the US dollar on Aug. 19.
Reconstruction package
Prime Minister Yoshihiko Noda, a former finance chief who replaced Naoto Kan last week, is drafting a third package to rebuild after the March quake. He has said the government is weighing measures to help companies deal with the rising yen.
The currency has climbed 3 per cent against the US dollar in the past three months. The appreciation has been driven by uncertainty about the outlook for the US economy and Europe's debt woes, which have boosted the yen's appeal as a safe haven.
Bank of Japan Governor Masaaki Shirakawa this week said uncertainties continue to be “very high” and that conditions haven't improved much since the central bank added stimulus last month.
Denso Corp., Toyota Motor Corp.'s biggest auto parts supplier, said last month that the strong yen is undermining its recovery from the March 11 earthquake and may prevent the company from raising its full-year profit forecast. Every one yen gain against the dollar cuts Denso's operating profit by 2.9 billion yen, the company said.
Honda Motor Co.'s Chief Financial Officer Fumihiko Ike told reporters Aug. 9 that he's concerned the yen may strengthen to the low 70s against the dollar, further hurting the nation's third-largest carmaker.
Bloomberg News