Japan said that its economy contracted 0.8 percent (on an annualized basis) in the third quarter after declining 0.7 percent in the second quarter.
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Analysts expect the Bank of Japan to launch more stimulus measures following the latest economic reading. The problem for Abe is that the company is the exception to the trend of reduced capital spending among Japanese automakers, which are increasingly relying on demand for growth.
While the Hang Seng the Hong Kong index rose to 22426.20 an increment of 1.9 percent the Shanghai Composite went up to 3661.71 up by about 1.5 percent of the mainland China. But the economy is still not on track, and it’s putting pressure on Abe.
Private consumption, which accounts for a few 60% of GDP, turned up 2.1% following a decline of 2.3% in the previous quarter.
Although critics say Abenomics has not helped the poor, Abe is credited with venturing forth with new measures, such as lowering corporate taxes, to wrest the economy out of decades of stagnation. “Weak capital spending was a concern, but excluding these factors, the GDP figures were not so bad”, said Takeshi Minami, chief economist at Norinchukin Research Institute.
“With the rapidly shrinking working population, the potential growth rate of Japan is very close to zero”, Takuji Okubo, an economist at Japan Macro Advisors, wrote in a report after Monday’s gross domestic product data was released in Tokyo.
PARIS JITTERS: The attacks in Paris last week are likely to hurt a few sectors of the economy. Japan’s economy has struggled to gain traction. But few economists see this as heralding sustained recovery, as sluggish wage growth continues to weigh on consumer sentiment. One bright spot: Industrial output advanced 1.1 per cent in September from the previous month, yet wasn’t enough to make up for contractions in July and August.
In 2013, BoJ Governor Haruhiko Kuroda announced a massive $1.4 trillion quantitative easing program in a bid to restore the economy to health and end years of deflation.
It marks the second recession since Prime Minister Shinzo Abe came to power almost three years ago and deals a fresh blow to his programme of aggressive monetary and fiscal stimulus – dubbed Abenomics – aimed at reviving growth.
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With monetary policy already ultra-loose, the government should boost fiscal spending to support private consumption through pay-outs to households, said ruling party lawmaker Kozo Yamamoto. While GDP marked the second straight quarter of contraction, it was mainly due to declines in inventory and increases in imports driven by growing final demand.
