Japan GDP revision raises recession fears Japan cut its second-quarter growth estimate in half on Monday, underlining the risk of recession as Europe's debt crisis hurts exports while the stubbornly strong yen weighs on sentiment. According to Cabinet Office data gross domestic product increased 0.2 per cent during the April-June period, lower than the initial reading of a 0.3 per cent gain, after downward revisions in inventories, government spending and private-sector investment. On an annualised basis, second-quarter growth was revised to 0.7 per cent, from the 1.4 per cent expansion reported last month. First-quarter growth was 5.3 per cent on an annualised basis, lifted by a resurgence of consumer spending and reconstruction efforts in the country's tsunami-hit northeast. Meanwhile, separate government data on Monday showed that exports fell 7.4 per cent in July from a year earlier, pushing down Japan's current account surplus more than 40 per cent. The figures add to concerns that the world's third-largest economy is at risk of at least one quarter of contraction in the second half of the year. With chances of fiscal stimulus apparently stymied by a political row over the timing of a general election, attention will focus on the prospects of fresh monetary stimulus this month from the Bank of Japan, which meets six days after the US Federal Reserve. Any move by the Fed towards a further round of quantitative easing, following the weak jobs report for August, could drive the US dollar lower against the yen, exacerbating pressure on Japan's exporters. The yen, at about 78.20 to the dollar at noon in Tokyo on Monday, has gained 2 per cent against the dollar so far this quarter. Last week Masaaki Shirakawa, governor of the BoJ, said the central bank was watching "more carefully for negative impacts of the yen's rise on the economy." Yunosuke Ikeda, head of foreign exchange strategy at Nomura in Tokyo, said: "The chance of additional easing from the BoJ is rising." Private consumption, which accounts for about 60 per cent of GDP, was unchanged in the revised estimate from the initial reading of a 0.1 per cent gain. But economists fear that the winding down this month of car-purchase subsidies may drag on consumption in the rest of the year, as the boost from reconstruction spending fades. "This second GDP estimate is definitely downbeat," said Masamichi Adachi, senior economist at JPMorgan, who is now preparing to publish a note entitled "Recession or stagnation? That is the question. Others are weighing the odds on another recession, which would be Japan's fourth over the past decade and a half. According to Deutsche Bank, three successive declines in its proprietary index of leading economic indicators is a reliable sign of recession. That index fell for a fourth month in July. Last week, the Cabinet Office kept its official view of the economy unchanged at "weakening."