The economy grew at a weaker than expected 0.1 percent in the April-June quarter as exports to the United States slowed and consumer spending declined, the Cabinet Office said Aug. 13.

The expansion in gross domestic product marks the 10th consecutive quarter of growth but corresponds to an annual pace of just 0.5 percent. Economists were expecting an annual pace of about 1 percent.

The slower growth and global liquidity squeeze make it less likely the Bank of Japan will raise interest rates in the near future, economists said. The economy grew 0.8 percent in January-March and 1.3 percent in October-December of 2006.

The weak data came out as the Bank of Japan was preparing to discuss interest rates at its two-day Policy Board meeting starting Aug. 22.

A slowdown in GDP does not necessarily pose a hurdle to an interest rate hike, but the recent shakeout in global markets — triggered by the woes of the sub prime mortgage market in the United States — will force the central bank to think twice, economists said.

"The figure was a bit lower than we expected and reflects a short-term economic slowdown," said Makoto Ishikawa, a senior economist at the Japan Research Institute in Tokyo. "The U.S. sub prime mortgage crisis and its impact on the (global) market will work against the central bank's intention to raise interest rates this month."

Concerns over the U.S. mortgage market prompted the world's top central banks to inject massive amounts of funds into the global financial system to bolster confidence and avert a global credit crunch.