Figures point to drift for Japan

By CNN's Alex Frew McMillan in Hong Kong

TOKYO, Japan -- Fresh figures hint at how bad the second quarter downturn hit Japan, the world's second-biggest economy.

Japanese economic activity to June fell 1.9 percent over the previous quarter, as measured by the Ministry of Economy, Trade and Industry's "all-industries" index.

It was the first quarterly decline since late 1998. That's a 7.3 percent annualized decline, which J.P. Morgan economist Ryo Hino noted was very sharp.

Though actually slightly firmer than analysts expected, Wednesday's figures give an early indication of how bad the second quarter was in Japan.

'Dire' GDP due

Japan reports its second-quarter gross domestic product figures on September 7. Those numbers are expected to be dire.

The country escaped a recession on a technicality last week, when a regular revision moved its first-quarter GDP to a 0.1 percent rise from a decline.

But economists still say that only postpones the inevitable.

Services was the biggest driver for Japan's economy.

The all-industries index showed a slight rise for the month of June over May, up 0.3 percent for the month. That hints at a slight improvement.

Restaurant sales and wholesale sales made up for a lag in retail. Construction rose a little, but less than expected.

Hino predicted a 4.5 percent slump in second-quarter GDP. Like many economists, he thinks Japan's recession will become official when it reports third-quarter figures in December. He expects a 2.0 percent decline then.

That meets the textbook definition of a recession, two straight declines in growth.

Hino and others also expect a third quarterly decline but are looking for signs of improvement early next year.

South Korea on Tuesday reported growth of 2.7 percent, a sharp drop from its previous pace and the worst quarter in three years. But it was still growth, and better than much of Asia.

Taiwan reported a 2.35 drop in second-quarter GDP last week, its worst quarter in 26 years.