Japan sank much deeper into recession than previously thought in the third quarter as firms slashed investment to cope with the financial crisis, official figures showed yesterday.
Japan’s economy shrank 0.5 percent in the three months to September — 1.8 percent on an annualized basis — entering its first recession in seven years with a second straight quarter of negative growth, the government said.
An initial estimate last month had shown the Japanese economy shrank 0.1 percent in the third quarter and 0.4 percent on an annualized basis.
“The data suggests that the economy is contracting faster than previously thought, and the depth of the recession will be more severe,” said Glenn Maguire, chief Asia economist at Societe Generale in Hong Kong.
“We still haven’t really seen the damage to the economy in the fourth quarter. Japan is coming from a much weaker footing than previously thought,” he said, predicting the recession would last until the middle of next year.
Weak business investment was the main culprit for the revision as companies slashed spending on new equipment and factories by 2 percent, compared with an initial estimate of 1.7 percent.
The latest snapshot of the economy was even worse than analyst forecasts for a contraction of about 0.2 percent quarter-on-quarter.
The government said the economy shrank a revised 1 percent in the second quarter, which was also slightly worse than previously thought.
The grim figures raised expectations that Japan’s central bank may reduce borrowing costs again to spur economic growth.
The Bank of Japan cut interest rates in October for the first time in seven years — by 20 basis points to 0.3 percent — as part of efforts to calm volatile markets and boost the recession-hit economy.
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