Japan’s economy declines for the first time since 2001
According to the government of Japan on Nov 17, the country’s economy slide into a recession for the first time since 2001. As the global economic crisis continues, companies in Japan cut back on spending in the third quarter sharply. The world’s second largest economy could further decline in the coming months, warned the government officials and economists.
After declining an annualized 3.7 percent in the second quarter, Japan’s economy shrank at an annual pace of 0.4 percent in the July-September period. That means Japan is now technically in a recession.
Glen Maguire, chief Asia economist at Societe Henerale said, more serious thing is the external demand starts to weigh more heavily on the Japanese economy; and such situation is probably going to continue.
Economists had predicted the gross domestic product would gain an annualized 0.1 percent. After the data had been released, Japan’s Ecomomy Minister Kaoru Yosano said “the economy is in a recessionary phase”.
What is worse, overseas demand for Japan’s autos and electronics gadgets is declining. Not only this, because of a strengthening yen, a growing number of exporters are making less and less profits, whether big or small. For example, Toyota Motor Corp has cut full-year profit forecast to only a third of last year’s earnings—550 billion yen.
As the cabinet office said, Japan’s GDP shrank 0.1 percent compared with the previous quarter. Business investment also dropped 1.7 percent form the previous quarter. Yosano said, “As the global economy is expecting to slow down for the time being, downward movements (in Japan) are expected to continue.”
Masamichi Adachi, senior economist at JPMorgan Securities in Tokyo lowers his expectation for the Japanese economy due to the deteriorating conditions. He said in a report this situation is similar to the Japanese internal financial market crisis in 1997 and 1998, so they are ready for a severe recession.
On Nov 17, oil prices fell below $56 a barrel in Asia. That worries the investors because of the potential influence to the crude demand.
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