Japan’s economy slid into a recession for the first time since 2001, the government said, as companies sharply cut back on spending in the third quarter amid the unfolding global financial crisis. Government officials and economists warned that the world’s second-largest economy could contract further in coming months.
Japan’s economy shrank at an annual pace of 0.4% in the July-September period after a declining an annualised 3.7% in the second quarter. That means Japan, along with the 15-nation euro-zone, is now technically in a recession, defined as two straight quarters of contraction.
“What we’re starting to see is the extent of deterioration in external demand start to weigh more heavily on the Japanese economy,” said Glen Maguire, chief Asia economist at Societe Generale. “And I think looking forward, there’s every indication that dynamic is going to continue.”
The result was worse than expected. Economists surveyed by a news agency had predicted gross domestic product would gain an annualised 0.1%. Japan’s economy minister Kaoru Yosano said following the data’s release that “the economy is in a recessionary phase.”
But the worst may be yet to come, especially with dramatic declines in demand from consumers overseas for Japan’s autos and electronics gadgets. Hurt also by a strengthening yen, a growing number of exporters big and small are slashing their profit, sales and spending projections for the full fiscal year through March.
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