Q3 - Japanese Economy Contracts Most Since Earthquake

Japan’s economy shrank last quarter as exports tumbled and consumer spending slumped, putting pressure on the central bank to add stimulus and hurting Prime Minister Yoshihiko Noda’s record as he prepares for elections.

Gross domestic product fell an annualized 3.5 percent, the most since the earthquake and tsunami in early 2011, Cabinet Office data showed today in Tokyo.

With analysts also seeing a GDP decline this quarter, according to a Bloomberg survey last week, Japan faces the risk of its third textbook-definition recession since 2008.


Exports to China have been undermined by anti-Japanese sentiment in the aftermath of the Noda administration’s purchase from a private owner of islands that China also claims.
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Today’s data showed that Japan’s economy is approaching its smallest size since at least 1993, with nominal GDP recording its third-lowest level since the current data series began.

The world’s third-largest economy will probably shrink at an annual pace of 0.4 percent this quarter, according to the median forecast of 24 economists surveyed by Bloomberg News. That would be the third technical recession since 2008. Japanese recessions are officially defined by a government-charged panel that considers data beyond GDP figures.

On a quarterly basis, the economy shrank 0.9 percent in the July-September period, today’s data showed.

Private consumption posted the first back-to-back drop last quarter since the six months through March 2009, declining 0.5 percent from the previous quarter as government subsidies for fuel-efficient cars ended. Capital investment dropped 3.2 percent, the steepest decline since the second quarter of 2009.


Machinery orders, an indicator of capital spending, fell the most in four months in September, data showed last week, while industrial production slid the most since the earthquake and exports dropped 10 percent.

In nominal terms, the economy contracted an annualized 3.6 percent in the third quarter, today’s data showed.

Net exports, or shipments less imports, subtracted 0.7 percentage point from GDP on a quarterly basis, the biggest decline in three quarters. Public investment rose 4 percent in the period, the third quarter of growth.

The GDP deflator, a measure of price changes across the economy, fell 0.7 percent last quarter from the same period of 2011.



http://www.bloomberg.com/news/2012-11-11/japan-s-economy-shrinks-at-fastest-pace-since-earthquake.html