Japan’s economy shrank sharply in the second quarter, the government said yesterday, as withering exports and faltering consumer demand edged the world’s No. 2 economy to the brink of recession.
Japan’s GDP, or the total value of the nation’s goods and services, dropped at an annual pace of 2.4 percent in the April-June period, a marked downturn from a 4 percent rise registered in the January-March period.
The numbers — the first negative reading in four quarters — bolstered evidence that Japan’s six-year expansion was over.
On a quarterly basis, Japan’s GDP contracted 0.6 percent, after a 0.8 percent increase in the January-March period, the Cabinet Office said. Private consumption, which accounts for more than half of real GDP, dropped 0.5 percent from the previous quarter. Housing investment was down 3.4 percent.
Two main drivers of Japan’s six-year economic recovery — business investment and exports — also deteriorated. Corporate capital investment in factories and equipment fell 0.2 percent from the previous quarter, while overall exports of goods and services slid 2.3 percent — lower for the first time in 13 quarters.
While acknowledging that the economy faces “downward risks,” Japanese Economy Minister Kaoru Yosano told reporters that the contraction is unlikely to be a long-term trend and should be evaluated “optimistically.”
The latest figures — widely expected — followed a series of sluggish economic indicators.
The government’s monthly economic report for this month released last week described the economy as “weakening.” Although the Cabinet Office refrained from using the term “recession,” it left out any reference to an economic “recovery” for the first time in more than six years.
Industrial production was down 2.2 percent in June from the previous month and slowing demand overseas is battering exporters.
In data released separately yesterday, Japan’s current account surplus — the widest barometer of its trade with the world — fell 67.4 percent from a year earlier to ¥493.9 billion (US$4.52 billion) as exports dropped and oil prices pushed up the import bill.
While economists disagree on whether Japan has entered recession territory, most note that the slowdown is likely to be shallow.
Glen Maguire, chief Asia economist for Societe Generale, said Japan is “tracking to a lower growth profile,” but stopped short of calling it a recession — commonly defined as two straight quarters of contraction.
“I don’t think the numbers are signaling the type of deep recessions we saw in the late 1990s and early 2001,” Maguire said. “Any slowdown in the Japanese economy is likely to be relatively modest.”
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