Wed, Mar 09, 2016 - Page 15 News List

Japan data show Q4 contraction


A woman walks through a shopping district in Tokyo on Monday.

Photo: Reuters

Japan’s GDP contracted 1.1 percent annually in the fourth quarter of last year, providing further evidence that the world’s third-largest economy is failing to gain traction despite unprecedented efforts by the central bank to spur growth.

The revised figures released yesterday compared with a 1.4 percent year-on-year expansion in the July-to-September quarter. They showed a modest improvement over the previous estimate of a 1.4 percent contraction in the October-to-December quarter.

However, data suggest Japan’s growth has remained tepid early this year, raising the likelihood of further government action to help boost growth. That could include further moves by the Bank of Japan to encourage lending, extra government spending and possibly a second delay in a sales tax hike scheduled for April next year.

“Companies have not been as downbeat about production in the month ahead since the 2008 recession. What’s more, consumer spending fell further in January as indicated by dips in ‘core’ household spending and retail sales,” Capital Economics analsyst Marcel Thieliant said in a commentary.

In quarterly terms, the economy shrank 0.3 percent in the last quarter compared with a preliminary estimate of a 0.4 percent contraction. Business investment climbed 1.5 percent, helping to offset a decline in spending on housing. Overall public investment dropped 3.4 percent.

Japan’s economy grew 0.5 percent last year after flat-lining in 2014

Economists are divided on whether the Bank of Japan, which holds a policy meeting next week, will expand asset purchases that are pumping trillions of yen into the economy to help combat deflation.

Last month, the central bank began charging a fee on some commercial banks’ deposits, imposing a negative interest rate policy that has driven bond yields and interest rates on mortgages and savings deposits lower.

Stuck with diminishing returns on their savings and unhappy with a newly implemented official identification system known as “My Number,” many Japanese households are investing overseas or just stashing cash at home: Sales of safes have soared so quickly that retailers said manufacturers cannot keep up with demand.

Bank of Japan Governor Haruhiko Kuroda defended the central bank’s strategy in a speech on Monday.

Companies and consumers would eventually begin spending more, enabling Japan to reach a 2 percent inflation target and vanquish deflation, he said.

“Japan’s economy has improved significantly from three years ago,” Kuroda said, noting low unemployment and record-high corporate profits — mainly due to a weakening of Japan’s currency resulting from the Bank of Japan’s monetary easing.

However, he acknowledged lackluster growth in corporate investment and wages.

Since banks’ profit margins are being squeezed, “there is a strong concern that the introduction of a negative interest rate will make the situation even worse,” Kuroda said, adding that an end to deflation would lead to higher interest rates in the long run.

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