Japan slips into technical recession with third-quarter contraction on falling domestic demand

TOKYO – Japan’s economy shrank in the July-September quarter as domestic demand declined, sending the nation into a technical recession.

The numbers from the Cabinet Office on Monday showed that gross domestic product, the value of a nation’s goods and services, declined at an annualized pace of 0.8 per cent in the third quarter, and contracted a seasonally adjusted 0.2 per cent from the previous quarter.

That meant the world’s third-biggest economy slipped into a technical recession, defined as two straight quarters of contraction, because it had contracted in the second quarter as well.

The government showed in its preliminary GDP estimates that domestic demand fell 1.2 per cent at an annual rate, as businesses held back on investments.

Japan has been slipping in and out of such periods of contractions, while eking out growth in between. Weak GDP numbers could prompt fresh government stimulus measures.

Prime Minister Shinzo Abe has repeatedly promised to wrest Japan out of the doldrums and show GDP can stay in positive territory, a challenge for an industrialized economy like Japan that relies on exports for growth and whose population is aging.

Analysts say the government is now more likely to announce a spending package later this year, and the Bank of Japan could also move on further easing. Both would be a plus for the economy.

In one sign of hope, the numbers Monday show Japanese consumers are spending.

The government has been encouraging companies to give wage increases in negotiations that happen early next year, another move that could encourage spending.


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