Japan's economy contracted more than initially estimated in the second quarter, largely due to a sharp downward revision in capital investment, second estimates from the Cabinet Office showed Tuesday.

Due to the restrictions imposed to contain the coronavirus spread, gross domestic product shrank by a record 7.9 percent sequentially instead of the 7.8 percent fall estimated initially.

On an annualized basis, GDP plunged 28.1 percent in the second quarter compared to the 27.8 percent decline estimated on August 17. The quarterly decline in capital investment was revised to 4.7 percent from 1.5 percent in the second quarter. Government consumption decreased 0.6 percent, which was more severe than the prior estimate of a 0.3 percent fall.

Meanwhile, private consumption dropped 7.9 percent, which was slower than the 8.2 percent decrease estimated previously. The declines in exports and imports were confirmed at 18.5 percent and 0.5 percent, respectively.

Separate data from the Ministry of Internal Affairs and Communications showed household spending declined 7.6 percent on a yearly basis in July. At the same time, household income advanced 9.2 percent from last year.

According to the Ministry of Health, Labor and Welfare, labor cash earnings declined for the fourth straight month in July. Average cash earnings fell 1.3 percent after easing 2 percent in June.

Overtime pay declined sharply by 16.6 percent, while scheduled wages gained 0.3 percent in July.

Tom Learmouth, an economist at Capital Economics, said wage growth improved in July and household incomes are likely to rebound further as more workers who lost their jobs during the state of emergency find employment again.

However, with far fewer workers on furlough and employment now starting to gradually recover, the big hit to household incomes is probably behind us, the economist noted.

Elsewhere, the Bank of Japan reported that bank lending growth improved to 6.7 percent in August from 6.4 percent in July. Lending by major banks climbed 8 percent and that by Shinkin banks grew 7.3 percent.

The current surplus fell 27.4 percent to JPY 1.47 trillion in July largely due to fall in primary income, the Finance Ministry reported Tuesday.

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