but it returns JavaScript object not a Json string:

Context matters, consider this code:

<?php
$array = ['name' => 'John Doe'];
$string = json_encode($array);
var_dump($string);

Executing that produces:

$ php index.php
string(19) "{"name":"John Doe"}"

string(19) means the variable is a string of 19 characters. The fact that string can be interpretted by js as an object is immaterial here, to php it is producing a string.

but it returns JavaScript object not a Json string

You skip a few steps here:

1. json_encode returns a string in PHP
2. That string is given to the echo statement
3. Everything that is output, is passed as the HTML page for the browser to interpret
4. The browser uses its JavaScript engine to parse the scripts that are part of the page -- that JSON is parsed as any other object literal that might occur in the script.
5. To the JavaScript engine, this part of the script is not a string, but an object literal.

It may help to rewrite the PHP script to something that is equivalent:

echo "
  <script>
   var app = " . json_encode($array) . ";
   alert(app.name)
 </script>";

So now it is clear that PHP sends one string, which happens to represent valid JavaScript -- enclosed in a <script> tag. The JSON is just a part of that long string, which later the browser will parse, and where the JavaScript part is parsed by a JavaScript engine.