Japan’s economy contracted for a second straight quarter in July-September, revised government data showed yesterday, indicating that weak global demand nudged the export-reliant economy into a mild recession.
Analysts expect another quarter of contraction in the final three months of this year due to sluggish exports to China, keeping the Bank of Japan under pressure to loosen monetary policy as early as this month.
“There have been some positive indicators out in October but there is still a good chance that Japan’s economy will suffer another contraction in the October-December quarter,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.
“The Bank of Japan may ease policy this month, as suggested in remarks by Deputy Governor Kiyohiko Nishimura last week. The bias is for further easing, so even if the central bank stands pat this month it will likely act in January,” he said.
Japan’s GDP shrank 0.9 percent in July-September from the previous quarter, revised government figures showed, unchanged from preliminary data reported last month. That compared with economists’ median forecast for a 0.8 percent contraction.
The figure translates into an annualized contraction of 3.5 percent in real, price-adjusted terms, which is also unchanged from the preliminary data issued last month.
The government revised GDP figures for April-June to show a small contraction of 0.03 percent, indicating that the economy contracted for two straight quarters and meeting the technical definition of a recession. The previous figure had shown growth of 0.1 percent.
Capital expenditure fell a revised 3 percent in the third quarter, compared with a 2.8 percent decline expected by economists and a preliminary reading of a 3.2 percent decline.
Separate data showed Japan’s current account surplus fell 29.4 percent in October from a year earlier, compared with the median estimate for a 59.2 percent annual decline, largely due to shrinking exports and increasing costs of fuel oil imports.
The nation’s consumer confidence and service sector business sentiment showed mixed results last month.
The survey’s sentiment index for general households, which includes views on incomes and jobs, fell for the third month in a row.
This prompted the government to cut its assessment on consumer confidence, saying there were signs of weakness.
Meanwhile, Japan’s service sector sentiment index, a survey of workers such as taxi drivers, hotel workers and restaurant staff, slightly improved for the first time in four months, but the government kept its view on the index that the economy remained weak.
Nishimura said last week the central bank will debate whether further stimulus is needed to support the economy, offering the strongest signal to date that it may loosen policy again at its next rate review on Dec. 19 and Dec. 20 in the face of growing political pressure.