Japan’s economony is back into recession, after it shrank 0.8% overall in the third quarter. The economy’s third quarter preliminary figure displayed a contraction of 0.2 percent which matched the prior revised reading but was below the 0.1 percent expected decrease.
Advertisement
According to Japan’s Cabinet Office inventories subtracted 0.5 percentage point from growth this quarter as companies reduced stocks and business investment subtracted 0.2 percentage point from growth. “Companies are still wondering whether the economy is resilient enough to increase investment, so domestic demand wasn’t strong enough to offset the weakness from overseas”.
From our standpoint, it is just a matter of time before the Japanese yen starts weakening again, especially against the United States dollar, as the monetary policy divergence will accentuate the yen’s debasement.
On a quarterly basis, growth fell 0.2% in the third quarter from the previous one.
“Consumers who pay more for value-added products will underpin private consumption”, said Hiroki Shimazu, senior economist at SMBC Nikko Securities. Indeed, consumption data was better in today’s report, ‘ he says.
The falling inventories and investment reflected companies’ reluctance to spend because of uncertainty about the global economic outlook.
Akira Amari, the government minister in charge of revitalising the economy, put a largely positive spin on the result, saying in a statement that the “business climate is expected to recover gradually”, citing rising wages as a bright factor.
Japan slipped into its fourth technical recession in five years between July and September, spotlighting how “Abenomics” policies by the government have struggled to drag the economy out of chronic stagnation.
Analysts broadly expect the economy to pick up in coming quarters, with the central bank seen further loosening monetary policy and Mr Abe tipped to unveil fresh stimulus. What remains challenging is inflation; the Bank of Japan and prime minister Shinzo Abe have stated they want to raise and maintain a higher inflation figure.
Tokyo financial markets closed following the announcement Monday, with the 225-issue Nikkei average losing 1.04 percent, closing at 19,393.69, and the Topix index of all first-section issues dropped 0.9 percent, closing at 1,571.53.
Advertisement
The chairman of the Japan Business Federation, country’s most influential corporate lobby group, Sadayuki Sakakibara, said on Monday that it was now time for further official measures to be introduced to shore up the economy.
