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Japan’s Economy Shrinks in 2nd Q.

December 6, 1999

TOKYO (AP) _ Japan’s economy shrank more than expected in the second quarter of the fiscal year after two quarters of expansion, the government said Monday, dealing a major blow to the country’s hopes of overcoming its worst economic rut in decades.

The country’s gross domestic product contracted 1.0 percent in the three months to Sept. 30, the Economic Planning Agency said.

A downturn was expected as the effect of government spending measures wear thin and consumer spending remains stagnant, but it was much larger that the 0.1 contraction expected by economists surveyed by Dow Jones Newswires.

Japan’s strong economic performance in the last two quarters had raised hopes that Japanese Prime Minister Keizo Obuchi would be able to fulfill his promise of delivering 0.5 percent GDP growth this year.

The economy grew by 0.1 percent in April-June, after surging 2 percent in January-March.

Before the announcement of the GDP data, economic planning chief Taiichi Sakaiya said growth this quarter would be ``difficult″ but that the government was confident that it could engineer growth this year if the contraction was smaller than 0.5 percent.

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