Japan's economy contracted for a third straight quarter as consumer spending and factory production continued to suffer in the aftermath of the March earthquake and tsunami.
Real gross domestic product (GDP) - a measure of the value of all goods and services produced domestically - contracted at an annualised rate of 1.3% in the April-June quarter, the Cabinet Office said.
The figures did provide a glimmer of optimism as a much bigger contraction was expected. A Kyodo News agency survey of analysts had forecast the economy to shrink 2.6%.
The March 11 earthquake and tsunami killed thousands of people and wiped out large parts of Japan's northern coast.
The disasters damaged many factories in the region, causing severe shortages of parts and components for manufacturers across the country, including car makers.
The tsunami also crippled a nuclear power plant and caused widespread energy shortages, especially in the Tokyo region, adding to headaches faced by businesses and households. The Cabinet Office said GDP fell 0.3% quarter on quarter.
Consumer spending -some 60% of the economy - dipped 0.1%. Capital investment by firms was up just 0.2% from the previous quarter.