Dip in GDP pushes nation into recession
Written by Meenaa on Tuesday, November 18th, 2008
Dip in GDP pushes nation into recession
The Yomiuri Shimbun
Japan’s economy has entered a recessionary phase, according to a preliminary report released by the Cabinet Office on Monday.
The nation’s real gross domestic product fell by 0.1 percent between July and September–0.4 percent in annualized terms–from the preceding quarter, to mark a second consecutive quarterly contraction.
Kaoru Yosano, state minister in charge of economic and fiscal policy, confirmed during a press conference that the economic recovery that started in 2002 has come to an end.
“The figures indicate the economy is in a downturn,” Yosano said.
Consecutive declines in the real GDP have not occurred since three quarters of negative growth between April and December 2001. In the July-September period, the United States suffered an annualized 0.3 percent decline in its GDP, while that of the eurozone declined by an annualized 0.8 percent. This makes it almost certain that Japan, the eurozone and the United States simultaneously entered a period of economic recession.
Since the collapse of U.S. major investment bank Lehman Brothers Holdings Inc. in mid-September, the global economy has been slowing, due to the financial crisis originating in the United States. It is therefore highly likely the Japanese economy will contract even further during the fourth quarter.
Yosano touched upon this possibility, saying, “There’s a large risk the country’s economy will worsen due to the negative influence of the financial crisis in the United States and Europe.”
The contraction of the Japanese economy during the July-September period was a result of private companies cutting back on equipment and plant investment. Lackluster consumer spending also was a factor.
According to the preliminary figures released by the Cabinet Office, corporate capital investment in the third quarter shrunk by 1.7 percent from the preceding quarter.
Consumer spending, which accounts for more than 50 percent of the GDP, increased by a mere 0.3 percent, as consumption remained almost unchanged, despite bullish sales of air conditioners during the hot summer and an upturn in the sale of flat screen TVs before and during the Beijing Olympics.
Meanwhile, exports showed an upturn for the first time in two quarters, increasing by 0.7 percent. However, imports rose by 1.9 percent, which pushed the GDP down.
The nominal GDP figures–which indicate the actual state of price movements and are a closer reflection of corporate and consumer confidence–also fell by 0.5 percent from the preceding quarter, or 2.1 percent on an annualized basis. The nominal GDP also fell for two consecutive quarters.
Because the GDP fell in both real and nominal terms for two quarters in a row, it is highly likely the GDP for fiscal 2008 will not reach the level projected by the government in July–a real 1.3 percent expansion and a nominal 0.3 percent rise from a year earlier.
(Nov. 18, 2008)
