Japan slides into recession, 1st time since 2001
TOKYO -- Japan's economy slid into a recession for the first time since 2001, the government said today, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis.
Government officials and economists warned that the world's second-largest economy could contract further in coming months.
Japan's economy shrank at an annual pace of 0.4 percent in the July-September period after a declining an annualized 3.7 percent 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.
"What we're starting to see is the extent of deterioration in external demand start to weigh more heavily on the Japanese economy," said Glen Maguire, chief Asia economist at Societe Generale. "And I think looking forward, there's every indication that dynamic is going to continue."
The result was worse than expected. Economists surveyed by Kyodo News agency had predicted gross domestic product would gain an annualized 0.1 percent.
Japan's Economy Minister Kaoru Yosano said following the data's release that "the economy is in a recessionary phase."
But the worst may be yet to come, 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 ($5.5 billion) -- about a third of last year's earnings. And Sony Corp., whose July-September profit plunged 72 percent, expects to make 59 percent less this fiscal year than last year.
Compared to the previous quarter, GDP shrank 0.1 percent, the Cabinet Office said. Business investment -- a main driver of Japan's six-year economic recovery since 2002 -- dropped 1.7 percent 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.
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 ($275.7 billion) proposal includes expanded credits for small businesses and a total 2 trillion yen ($20.4 billion) in cash disbursements to households.
