Japan’s economy shrank in the first quarter, veering back into recession as factory production and consumer spending wilted in the aftermath of the March 11 earthquake and tsunami.
Real GDP — a measure of the value of all goods and services produced domestically — contracted at an annualized rate of 3.7 percent in the January to March period, the Japanese Cabinet Office said yesterday.
The result marks the second straight quarter that the world’s No. 3 economy has lost steam and undershoots an annualized 2.3 percent fall forecast in a Kyodo News agency survey.
Photo: EPA
While there is no universally accepted definition of a recession, many economists define it as two consecutive quarters of GDP contraction. Others consider the depth of economic decline as well as other measures like unemployment.
Martin Schulz, senior economist at Fujitsu Research Institute in Tokyo, said there is “no doubt” that recession has returned. More surprising is just how quickly the economy crumpled, he said.
The latest GDP report includes just 20 days following the disaster, but “the impact is huge,” said Schulz, who had expected to see most of the economic fallout in the second quarter.
The Nikkei 225 stock average fell 0.4 percent to 9,620.82.
After four solid quarters of growth, Japan’s GDP turned negative in the last three months of last year owing to weaker exports and consumer demand. The downturn was expected to be temporary.
Instead, Japan has now recorded consecutive quarters of contraction for the first time since the global financial crisis. GDP fell for four straight quarters starting April 2008.
Japanese Economic and Fiscal Policy Minister Kaoru Yosano described the current slump as milder than the previous slide, when global demand “evaporated instantly.”
“The Japanese economy’s ability to rebound is sufficiently strong,” Yosano said, according to Kyodo News agency.
Goldman Sachs said the economy would likely bottom in the second quarter. It expects GDP to begin growing again in the third quarter as reconstruction bolsters demand in both the private and public sectors.
“We assume the production and exports will shift to mild growth facilitated by supply chain restoration, although power supply is an uncertain factor,” Goldman Sachs chief Japan economist Naohiko Baba said in a report to clients.
The first-quarter GDP figure translates to a 0.9 percent fall from the previous three-month period, according to the Cabinet Office data.
Consumer spending, which accounts for about 60 percent of the economy, declined 0.6 percent. Capital investments by companies retreated 0.9 percent from the October to December quarter.
To fund recovery spending, Japan’s parliament passed at ￥4 trillion (US$49 billion) budget supplement earlier this month. Further government outlays are expected to follow in the months ahead.
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