Japan's economic growth over April-June was faster than initially estimated, the Cabinet Office said on Thursday, with upward revisions to capital expenditure and inventories, but weak demand at home and overseas is seen weighing on growth this quarter.
The Cabinet Office said the economy grew at a 0.7 percent annualized rate over April-June, an upward revision of the preliminary reading of 0.2 percent growth, in which the strong yen and weak demand were seen undermining exports and capital spending.
Japan's economy, the world's third largest, is seen lacking momentum in the current quarter as well, following a recent run of weak export, factory output and household spending data.
Unless overseas economies improve and the yen's gains fade away, the economy is at risk of faltering later this year, before Prime Minister Shinzo Abe's government fully implements the stimulus package it unveiled last month, some analysts say.
The tame economic outlook will keep the Bank of Japan under pressure to ease policy further as the central bank conducts comprehensive assessment of the effects of its stimulus program at its Sept. 20-21 rate review.
The revised gross domestic product (GDP) data compared with economists' median estimate of a 0.0 percent reading in a Reuters poll.
The figure translates into quarter-on-quarter growth of 0.2 percent in real, price-adjusted terms, against an initial reading of 0.0 percent.
Capital expenditure, a key component of GDP, fell 0.1 percent for the quarter, versus the preliminary estimate of a 0.4 percent decline.
Inventories contributed 0.1 percentage point to growth, versus the preliminary slightly negative contribution recorded.
Private consumption, which accounts for roughly 60 percent of the economy, rose 0.2 percent, unchanged from the preliminary estimate.
Taken together, domestic demand contributed 0.4 percentage point to growth, versus the initial 0.3 percentage point registered. Net exports knocked 0.3 percentage point off growth.
With economic growth having ground almost to a halt and inflation sliding further away from the central bank's 2 percent target, most analysts expect the BoJ to loosen policy this month.
BoJ Gov. Haruhiko Kuroda signaled his readiness on Monday to ease policy further, shrugging off some concerns that monetary stimulus is reaching the limits of its effectiveness. 
Meanwhile, BoJ Deputy Gov. Hiroshi Nakaso said the central bank would not rule out deepening negative interest rates or any other easing steps needed to achieve its price target.

Nakaso said the BoJ's comprehensive assessment of its policy effects to take place later this month will look at ways to accelerate achievement of its 2 percent inflation target. It will not discuss ways to withdraw its ultra-loose monetary policy.
Nakaso declined to comment about speculation that the BoJ could resort to buying foreign-currency denominated bonds. He ruled out targeting the foreign exchange market with monetary policy.
While inflation is expected to resume a gradual uptrend, uncertainty persists on whether such price rises will heighten inflation expectations, Nakaso said.
"Based on a candid assessment, we will decide whether or not it will be necessary to make adjustments to the current policy framework, and if judged necessary, in what way it should be adjusted," Nakaso said in a speech on Thursday.
Under its current framework combining negative rates with hefty buying of government bonds and some riskier assets, the BoJ has gobbled up a third of Japan's bond market and attracted criticism from banks for squeezing already thin profit margins.
Sources have told Reuters the BoJ will consider modifying its policy framework and debate some of the unintended consequences of its ultra-loose policy at the rate review Sept 20-21.
The BoJ will not abandon its 2 percent price target, Nakaso said, adding that there was little sense in debating whether to abandon its two-year deadline for attaining the price goal as three-and-a-half years have elapsed since the BoJ began quantitative easing.
Nakaso acknowledged the BoJ's decision in January to adopt negative rates may impair financial intermediation by hurting financial institutions' profits, if maintained for a long time.
The BoJ will pursue its massive asset-buying program and negative rates by "striking the right balance" between the program's powerful policy effects and possible impairment of financial intermediation, Nakaso said.
But that does not mean the central bank will rule out any further cuts in the negative interest rate, he added.
"Depending on economic, price situations and financial conditions, further measures may still deemed necessary" after weighing the benefits and costs of current policies, he said.
When asked about calls from some academics such as Prime Minister Shinzo Abe's adviser Koichi Hamada for the BoJ to buy foreign bonds, Nakaso said he couldn't comment because he did not know in what context such calls are being made.

Source: Arab News