Japan sinks into mild recession


Posted at Dec 10 2012 03:26 PM | Updated as of Dec 10 2012 11:26 PM

TOKYO - The Japanese economy shrank for a second quarter in a row in the three months through September, revised government data showed Monday, indicating the world's third-largest economy has entered a mild recession amid sluggish global demand.

The Cabinet Office said gross domestic product fell at an annual pace of 3.5 percent in inflation-adjusted terms, unchanged from preliminary data, but it revised GDP figures for the preceding quarter to a small contraction, matching the textbook definition of a recession.

With the data presenting a clearer view that the economy has started contracting, political pressure is likely to rise on the government to craft fresh stimulus measures after next Sunday's general election and for the Bank of Japan to further loosen its monetary policy.

GDP shrank 0.9 percent in July-September, unrevised from the preliminary data released on Nov. 12, as an upward revision in private-sector demand was offset by a downgrading of exports and public investment.

For the April-June period, GDP was revised downward to a 0.03 percent fall, or an annualized 0.1 percent decline, down from an earlier figure of a 0.1 percent increase or an annualized 0.3 percent gain.

Corporate capital spending fell an upwardly revised 3.0 percent, tamer than the 3.2 percent deceleration reported earlier. Private consumption, accounting for some 60 percent of Japan's GDP, was also upgraded to a 0.4 percent fall from a 0.5 percent decline due largely to increased spending on automobiles and televisions.

On the other hand, exports were downgraded to a 5.1 percent decline from the earlier reported 5.0 percent fall. Public investment was also revised down to a 1.5 percent increase from a 4.0 percent gain.

Noting the economy is likely to have entered a recessionary phase after hitting its peak in March, Yuichi Kodama, chief economist at Meiji Yasuda Life Insurance Co., said the economy is "likely to stay weak for a while."

"The data reaffirmed that the momentum of reconstruction demand (from the massive quake last year) has been slowing," he said, adding, "While reconstruction demand is not strong enough to bolster the economy, external demand has been sluggish."

GDP is the total value of goods and services produced domestically. Real numbers are adjusted for price and seasonal variations.

In nominal terms, or before inflation adjustment, the economy shrank 0.9 percent in the July-September quarter from the April-June period, or an annualized 3.6 percent contraction, both unchanged from the earlier released figures.

The GDP deflator, a wider gauge of inflation than the consumer price index, marked a 0.04 percent slide, downwardly revised from a 0.02 percent fall, indicating the Japanese economy has been mired in chronic deflation.

GDP for fiscal 2011 ended March was revised upward to a 0.3 increase from the earlier reported contraction of 0.03 percent, showing that the Japanese economy grew for the second consecutive year.