Ja­pan dips into re­ces­sion in stum­ble for ‘Abe­nomics’

Kuwait Times - - BUSINESS -

TOKYO: Ja­pan’s econ­omy slipped into re­ces­sion for the sec­ond time since Prime Min­is­ter Shinzo Abe came to power nearly three years ago, data showed yes­ter­day, deal­ing a fresh blow to his drive to kick­start weak growth and end years of de­fla­tion. Abe has staked his rep­u­ta­tion on a pol­icy blitz of fis­cal spend­ing, ag­gres­sive mon­e­tary pol­icy eas­ing and struc­tural re­forms­dubbed Abe­nomics-aimed at re­viv­ing the world’s third-largest econ­omy Ja­pan’s econ­omy, once Asia’s big­gest, has been over­taken by ri­val China, while it strug­gles with a chal­leng­ing de­mo­graphic out­look that is ex­pected to see its pop­u­la­tion shrink by the tens of mil­lions in com­ing decades.

Still, it boasts some of the world’s big­gest com­pa­nies, in­clud­ing in the au­to­mo­tive sec­tor, and banks, and its do­mes­tic tech­nol­ogy plays a key role in pow­er­ing a wide ar­ray of global in­dus­tries, in­clud­ing ve­hi­cles, elec­tron­ics and high-end ma­chin­ery.

But the Cab­i­net Of­fice said Mon­day that gross do­mes­tic prod­uct (GDP) shrank 0.2 per­cent in the July-Septem­ber pe­riod, or an an­nu­al­ized con­trac­tion of 0.8 per­cent, mark­ing the sec­ond straight quar­terly de­cline-con­sid­ered a tech­ni­cal re­ces­sion.

It was also be­low the 0.1 per­cent forecast in a Bloomberg News sur­vey.The econ­omy con­tracted in 2014 af­ter con­sumers tight­ened their belts fol­low­ing an in­crease in the coun­try’s consumption tax, which put a dent in a nascent re­cov­ery. That down­turn spurred the Bank of Ja­pan to sharply in­crease its al­ready mas­sive bond-buy­ing pro­gram, ef­fec­tively print­ing money to spur lend­ing. In a bright sign, the gov­ern­ment slightly im­proved its April-June data to a 0.2 per­cent con­trac­tion from 0.3 per­cent shrink­age pre­vi­ously es­ti­mated.

The lat­est fig­ures will turn at­ten­tion back to the BoJ ahead of a pol­icy meet­ing this week to see whether it adds to its 80 tril­lion yen ($653 bil­lion) an­nual stim­u­lus pro­gram.

‘Econ­omy at stand­still’

The data of­fer a mixed snap­shot of the econ­omy, with im­prov­ing consumption coun­tered by weak­en­ing cor­po­rate in­vest­ment caused by un­cer­tainty over the global out­look, par­tic­u­larly China, ex­perts said. “The real econ­omy is at a stand­still, even though other as­pects of ‘Abe­nomics’-cor­po­rate earn­ings and stock prices-are im­prov­ing,” Taro Saito, di­rec­tor of eco­nomic re­search at NLI Re­search In­sti­tute, told AFP.

“Com­pa­nies are re­luc­tant to in­vest de­spite their sound prof­its,” he said, adding that while con­sumer spend­ing im­proved “its over­all trend still re­mains weak”.

Akira Amari, the gov­ern­ment min­is­ter in charge of re­vi­tal­is­ing the econ­omy, put a largely pos­i­tive spin on the re­sult, say­ing that the “busi­ness cli­mate is ex­pected to re­cover grad­u­ally”, cit­ing ris­ing wages as a bright fac­tor. But he openly voiced frus­tra­tion to­wards busi­nesses that have shied away from fresh in­vest­ments.

“Hav­ing made record prof­its, with their equip­ment be­com­ing older, what kind of busi­ness de­ci­sion is it to still forgo in­vest­ment?” Amari told a news con­fer­ence. Amari said the gov­ern­ment was draft­ing an ex­tra bud­get, not as a “pure” stim­u­lus, but to of­fer so­cial pro­grams and deal with the 12-na­tion Tran­sPa­cific Part­ner­ship free-trade deal.

He de­clined to dis­cuss the size of the bud­get, how­ever. The bench­mark Nikkei-225 stock in­dex fell 1.04 per­cent by the end of trade, with the Paris terror at­tacks adding to in­vestor un­ease in Asia. Still, an­a­lysts broadly ex­pect the econ­omy to pick up in com­ing quar­ters, with the BoJ seen fur­ther loos­en­ing mon­e­tary pol­icy and Abe tipped to un­veil fresh stim­u­lus.

“De­tails are not as bad as the fig­ures might sug­gest,” Ju­nichi Makino, econ­o­mist at SMBC Nikko Se­cu­ri­ties, said in a note, cit­ing de­clines in in­ven­to­ries and in­creas­ing im­ports.

For tech­ni­cal rea­sons those re­sults neg­a­tively af­fect GDP but can ac­tu­ally im­ply in­creas­ing de­mand.

But Mar­cel Thieliant, econ­o­mist at Cap­i­tal Eco­nomics, said any re­cov­ery should be viewed with cau­tion. “Look­ing ahead, the econ­omy should start to re­cover this quar­ter, but we think that growth in the cur­rent fis­cal year will be closer to 0.5 per­cent rather than the 1.2 per­cent pro­jected by the Bank of Ja­pan at its end-Oc­to­ber meet­ing,” he wrote in a note to clients.

Thielient said he ex­pected the BoJ to hold off fur­ther eas­ing for now but ex­pand it early next year. —AFP


TOKYO: This pic­ture shows the Tokyo’s Shin­juku sky­scrapers (top) and the planned con­struc­tion site (bot­tom) for the new na­tional sta­dium for the Tokyo 2020 Olympic Games in Tokyo yes­ter­day. Ja­pan’s econ­omy slipped into re­ces­sion for the sec­ond time since Prime Min­is­ter Shinzo Abe came to power nearly three years ago on a vow to re­vive growth and end chronic de­fla­tion, gov­ern­ment fig­ures showed yes­ter­day.


TOKYO: Pedes­tri­ans walk past a share prices board of the Nikkei 225 at the Tokyo Stock Ex­change in Tokyo yes­ter­day.

Newspapers in English

Newspapers from Kuwait

© PressReader. All rights reserved.