business

Japan slides into recession for 1st time since 2001

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Japan's economy slid into a recession for the first time since 2001, the government said Monday, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.

The world's second-largest economy contracted at an annual pace of 0.4% in the July-September period after a declining an annualized 3.7% in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.

The result was worse than expected. Economists surveyed by Kyodo News agency had predicted an annualized 0.1% rise in the third quarter.

Economy Minister Kaoru Yosano said following the data's release that "the economy is in a recessionary phase," according to Kyodo.

But the worst may be yet to come in the wake of the global financial crisis, especially with dramatic declines in demand from consumers overseas for Japan's autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.

Toyota Motor Corp., for example, has cut net profit full-year profit forecast to 550 billion yen -- about a third of last year's earnings.

Compared to the previous quarter, gross domestic product shrank 0.1%, the Cabinet Office said. Business investment -- a main driver of Japan's six-year economic recovery since 2002 -- dropped 1.7% from the previous quarter.

"As the global economy is expected to slow down for the time being, downward movements (in Japan) are expected to continue," Yosano said, according to Kyodo.

Since taking office in late September, Japanese Prime Minister Taro Aso has unveiled two economic stimulus packages in an effort to cushion the blow. His latest 27 trillion-yen proposal includes expanded credits for small businesses and a total 2 trillion yen in cash disbursements to households.

At its last meeting, the Bank of Japan cut its key interest rate for the first time in more than seven years, lowering it to 0.3%, joining central banks around the world in trimming borrowing costs.

In its semiannual outlook report, the central bank slashed its projection for economic growth to just 0.1% for the year through March, compared with a 1.2% gain it projected in July. It said both exports and domestic private demand have weakened.

The deteriorating conditions also recently led Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo, to downgrade his outlook on the Japanese economy.

"We are now looking for a severe recession, similar to that during Japan's own financial market crisis in 1997 to 1998, and to the current U.S. recession, in terms of depth of real GDP contraction," he said in a report.

Monday's data showed that net exports sapped 0.2 percentage point from growth, as the high cost of importing fuel eclipsed a slight increase in outbound shipments. Imports rose 1.9%, while exports grew 0.7%.

Private consumption, which accounts for more than half of inflation-adjusted GDP, increased 0.3% from the previous quarter. However, the rebound in consumer demand is unlikely to last, economists say.

© Wire reports

©2022 GPlusMedia Inc.

16 Comments
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Japan no longer needs to feel isolated. It has now become the latest member of the American led world recession group. To remain a member, it needs to encourage more spending and less saving, more use of credit cards and offer sub-prime loans to those with bad credit ratings.

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Japan has never been out of recession. What a joke to believe it has.

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Japan's first recession in seven years is cause for great concern. One by one, it seems that the major economies of the world are succumbing to economic hardship. The EU, the US and now Japan are caught in the iron grip of fiscal contraction, which shows no immediate sign of abating. Hopefully, the Aso government's stimulus packages of US$277 billion to small businesses and US$20 billion to householders will eventually lead to an improvement. What is desperately needed, however, is growth, and, for the present, this does not appear likely.

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Stimulus package a.k.a. just printing money. Most Japanese will just put the handout in the bank. Until Japanese change their mindset about savings and its usage we are in for another "lost decade."

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I suppose the "recession" in Japan should quell any talk of raising consumption taxes. I wonder if they would consider selling off parts of Japan to other countries as a way to generate more revenues.

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No worry...Japan is "cash rich" and we hear that mantra every day.

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the death of capitalism is finally here. Expect to see major social unrest in japan and elsewhere. Well maybe not in shoganai japan.

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Agree with "noborito" above. Japan has never been out of a recession since the early 90s! This is old news.

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The Japanese government today officially said Japan had entered a recessionary period.

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Japan has pretty much been in recession since the bubble burst. Growth has been disappointing and life has gotten worse. Maybe now they feel comfortable admitting the recession as the whole world is back sliding.

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the death of capitalism is finally here. Expect to see major social unrest in japan and elsewhere. Well maybe not in shoganai japan.

There wasn't any capitalism. Maybe corporate fascism, the 3rd way, but not capitalism. this crisis wouldn't have happened in capitalism. government policies led to this.

Japan is going to be far better off than most other countries. Once they stop concentrating on export and adjust their strategies for internal market,they will blossom. I am getting ready to buy some Japanese stocks. they gonna rock. not to mention how lucky we are to have yen.

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Japan has been a major leader in the downturn of the worlds economy. Japan has refused to open its markets, ignored opportunities to increase domestic spending, and has pretty much muddled its way into irrelevance ! The current lack of political leadership will only intensify Japans plight... time to pack yer bags and say good riddence to Nippon ! The sun has all but set !

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Unlike many other countries, the Japanese did not go on a credit card binge, take out loans they couldn't afford or not save for a rainy day. The Japanese have been, generally, level-headed when it comes to monetary fiscal responsibilty. As for industries, one only has to compare the irresponsibility of the American car industry to the Japanese car industry. At this very moment, executives of the major American car companies are going cap in hand to congress asking for a bailout. From the financial sector to the car industry, America has been totally irresponsible. Now, the world is paying for that irresponsibility.

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Sorry buttamimi, but...

"Unlike many other countries, the Japanese did not go on a credit card binge, take out loans they couldn't afford or not save for a rainy day. The Japanese have been, generally, level-headed when it comes to monetary fiscal responsibilty."

You seem way out of touch on this topic. Fact is,Japan's huge government debt, which totals 182% of GDP, is, and has been, doing more damage to Japans economy for the past 10 years than what the US will experience with this short term "adjustment" ! Corporate bankruptcies remain at all time highs and unrecoverable debt will only increase. Americans will consolidate, merge, and adjust accordingly... Japan will just flounder about like a frog in a pot of ever increasing hot water !

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Please abolish the minimum wage.

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There is no doubt what triggered the present World recession. It was the American sub-prime loan debacle, coupled with the hands-off deregulatory mindset of the American government. If anyone believes that what is going on now in America is an "adjustment," is living in cloud cuckoo land. How interesting it is to see the big American auto makers going cap in hand for bailout money to the American congress. How pathetic. Here we have an auto industry which has been producing gas guzzling cars without a thought for the future, and now when they are unable to sell them, they expect the taxpayer to bail them out. What a joke. If anyone wants to see 'frogs floundering around in a pot of increasing hot water,' I suggest take take a trip to Detroit.

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