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Japan slides into recession for first time in seven years
Japan slid into its first recession in seven years in the third quarter as exports crumbled, and some analysts said an escalation in the global financial crisis may have put the economy on course for its longest ever contraction.
- Reuters
- Published: 23:29 November 17, 2008
Tokyo: Japan slid into its first recession in seven years in the third quarter as exports crumbled, and some analysts said an escalation in the global financial crisis may have put the economy on course for its longest ever contraction.
The 0.1 per cent contraction in July-September gross domestic product barely captured the impact of the financial fire-storm that began in mid-September, wrecking Wall Street banks, triggering a stock market crash in Tokyo and a yen rally that may hit exporters even harder.
The euro zone is also in recession, using the common definition of two consecutive quarters of contraction, and the US economy is expected to follow, having shrunk in the third quarter.
Some economists said Japan, the world's second-largest economy, could be headed for a record four quarters of shrinking output while Economy Minister Kaoru Yosano warned of increasingly tough times ahead. "The downtrend in the economy will continue for the time being as global growth slows," Yosano told a news conference.
"We need to bear in mind that economic conditions could worsen further as the US and European financial crisis deepens, worries of economic downturn heighten and stock and foreign exchange markets make big swings."
Tokyo's Nikkei share average has fallen by a quarter since the start of October, potentially denting consumption, and the yen spiked to a 13-year high against the dollar last month, hitting exporters.
External demand detracted 0.2 per cent from GDP in the third quarter as imports grew faster than exports, and, while private consumption rose 0.3 per cent, Yosano said that was due to one-off factors.
The third-quarter GDP figure translated into an annualised contraction of 0.4 per cent, compared with a consensus market forecast for a 0.3 per cent expansion, government data showed.
Japan's second-quarter economic contraction was revised in yesterday's data release to a steeper 0.9 per cent slide, the biggest drop in seven years.
Bank of Japan Deputy Governor Kiyohiko Nish-imura warned that the market turmoil may not be over. "Due to strong awareness of counterparty risks in the dollar markets, the function of these markets is declining and Japan's financial market is also becoming unstable," he said.
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