Japan’s economy grew less than initially estimated in the second quarter and wages slumped in July, casting doubt over central bank projections that solid domestic demand will keep the country on course for a recovery.

Capital expenditure and private consumption both fell in the April-June period, revised gross domestic product (GDP) data showed on Friday, underscoring the fragile state of Japan’s economy, which is already facing headwinds from weakening Chinese and US growth.

Real wages adjusted for inflation fell in July for a 16th straight month in a sign households continued to feel the pinch from rising prices, separate data showed, boding ill for consumption.

“Weak exports to China may be making Japanese manufacturers cautious about investing. The hope is that service-sector firms will pick up the slack, though sluggish consumption could discourage them to spend money, too,” said Takeshi Minami, chief economist at Norinchukin Research Institute.

Japan’s economy grew an annualised 4.8% in April-June, the revised data showed, down from a preliminary estimate of 6.0% growth and below market forecasts for a revised 5.5% expansion.

The main factor behind the downgrade was a 1.0% drop in capital expenditure, compared with a preliminary flat reading, casting doubt on the BOJ’s view that robust corporate spending will underpin Japan’s post-pandemic economy. The revised decline was bigger than a median market forecast for a 0.7% fall.

Private consumption, which makes up more than half of the economy, fell 0.6% quarter-on-quarter in the April-June period, compared with a preliminary 0.5% decline.

Exports remained solid in April-June with net external demand contributing 1.8% points to GDP growth, unchanged from the preliminary reading.

But shipments to China slumped 13.4% in July to mark the 8th straight month of falls. Overall exports slid 5.0% year-on-year in the first half of August after a 0.3% decline in July, suggesting the global slowdown was taking a toll on the economy.

As weak domestic demand led to declines in imports, Japan’s current account surplus logged a record amount for the month of July, separate data released on Friday showed.

“I won’t be surprised if Japan suffers two straight quarters of contraction during the rest of this year,” said Minami of Norinchukin. “The chance of an early end to ultra-loose monetary policy is diminishing.” Japan’s economy has seen a delayed recovery from the COVID-19 pandemic this year, as rising living costs faltering global demand cloud the outlook.

Given such uncertainties, Bank of Japan policymakers have stressed their resolve to keep monetary policy ultra-loose until the recent cost-driven inflation turns into price rises driven by domestic demand and higher wage growth.

Japanese investors chose foreign bonds over equities in August, as yields surged and global stocks declined on fears that higher interest rates could prevail for longer than expected.

They purchased 1.76 trillion yen ($11.95 billion) worth of long-term foreign bonds on a net basis last month after selling about 1.64 trillion yen in July.

Japanese insurers were net buyers of foreign debt for the first time in four months, with purchases to the tune of 2.32 trillion yen. Bankers also accumulated about 370.3 billion yen of overseas bonds last month.

Last month, US Treasury yields climbed to their highest in 16 years on expectations of an extended period of high-interest rates after US jobs and consumption data pointed to a surprisingly resilient economy.

Japanese investors, however, exited about 112.1 billion yen of foreign equities in August, marking their second monthly net selling in a row.

As per the data, as of July, Japanese investors had poured a net 14.01 trillion yen into US bonds this year, while withdrawing about 1.33 billion yen from European debt securities.

Meanwhile, Japan’s Nikkei share average fell more than 1% on Friday, sending it to a first weekly loss in three, as the benchmark tracked Wall Street losses amid worries about tighter U.S. Federal Reserve policy and a Chinese iPhone ban.

Tech and industrial companies were among the biggest losers, with chip-making equipment giant Tokyo Electron dropping 3.83% to become the Nikkei’s biggest drag, shaving off 85 index points.

Mobile game and ad company CyberAgent tumbled 6.83% to be the Nikkei’s top percentage decliner.

The Nikkei slid 1.16% to 32,606.84, as of the close. That extended a 0.75% decline from Thursday when it also snapped an eight-day winning streak after touching a more than one-month peak of 33,322.45 early in the session.

For the week, the benchmark index slipped 0.32%. The broader Topix sagged 1.02% on Friday, also falling for a second day after marking a 33-year peak early in Thursday’s session.