Economic growth in Japan weakened significantly in the last financial quarter, official figures show.

Between April and June this year gross domestic product - the sum of the nation's goods and services - grew at 0.1%, much lower than expected.

Analysts said the country's export-led recovery appeared to be faltering as the value of the yen appreciates.

The figure is a stark contrast to the 2.2% German economic growth and 2.4% US economic gain in the same period.

The data indicates that China remains poised to overtake Japan as the world's second biggest economy.

That will become clearer early in 2011 when GDP figures for the whole of 2010 become available for each country.

The BBC's Roland Buerk in Tokyo says Japan remains one of the wealthiest and most prosperous countries in the world, but the trajectory of its economy has been clear for years.

World Bank figures show that in the first eight years of this century Japan's economy expanded by just 5% while China's grew by 261%.

Japan has relied on exports for growth, but the problem is that the yen has been rising, making Japan less competitive abroad, our correspondent says.

Latest figures showed that Japanese exports rose in June but at a slower pace than in recent months, raising questions about the strength of the country's economic recovery.

The yen hit a 15-year high against the US dollar last week - adding to worries about the impact on exporters.

Demand at home in Japan has been weak too, with deflation, or a fall in prices, returning to the economy.

'Risk of collapse'

The country's industrial production also fell in June compared with May, although it was up on the same time a year before.

Analysts have also warned that austerity measures introduced by governments around the world to reduce debt levels could hit Japan's exports later this year.

"With the need to rebuild its public finances, the Japanese government has its hands tied," said Norinchukin Research Institute economist Takeshi Minami, who believes further stimulus is needed.

"Japan needs to quickly implement measures to tackle the strong yen, including currency intervention.

"The government will shift its focus towards financial measures through the Bank of Japan, such as currency intervention or pumping extra money. It needs to continue maintaining an easy monetary policy."

New Prime Minister Naoto Kan recently said Japan was "at risk of collapse" under its huge debts.

The country's central bank also announced a scheme to offer 3tn yen in low-interest loans in an effort to spur economic growth.

Source: bbc.co.uk

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