Japan’s economy contracted for a second straight quarter in July-September, revised government data showed on Monday, indicating that weak global demand nudged the export-reliant economy into a mild recession.
Analysts expect another quarter of contraction in the final three months of this year due to sluggish exports to China, keeping the Bank of Japan under pressure to loosen monetary policy as early as this month.
“There have been some positive indicators out in October but there is still a good chance that Japan’s economy will suffer another contraction in the October-December quarter,” said Takeshi Minami, chief economist at Norinchukin Research Institute in Tokyo.
“The Bank of Japan may ease policy this month, as suggested in remarks by Deputy Governor Kiyohiko Nishimura last week. The bias is for further easing, so even if the central bank stands pat this month it will likely act in January.”
Japan’s gross domestic product (GDP) shrank 0.9 per cent in July-September from the previous quarter, revised government figures showed, unchanged from preliminary data reported last month. That compared with economists’ median forecast for a 0.8 per cent contraction.
The figure translates into an annualized contraction of 3.5 per cent in real, price-adjusted terms, also unchanged from the preliminary data issued last month.
The government revised GDP figures for April-June to show a small contraction of 0.03 per cent, indicating that the economy contracted for two straight quarters and meeting the technical definition of a recession. The prior figure had shown growth of 0.1 per cent.
Capital expenditure fell a revised 3.0 per cent, compared with a 2.8-per-cent decline expected by economists and a preliminary reading of a 3.2-per-cent decline.
Separate data showed Japan’s current account surplus fell 29.4 per cent in October from a year earlier, compared with the median estimate for a 59.2 per cent annual decline, largely due to shrinking exports and increasing costs of fuel oil imports.
Japan’s main opposition Liberal Democratic Party, a champion of big spending on public works, is on course to win a solid majority in a lower house election on December 16, according to media polls, and return to power for the first time since 2009.
A weak economic outlook and threats from politicians to limit the BOJ’s independence are likely to keep up pressure on the central bank to ease monetary policy further.
BOJ Deputy Governor Kiyohiko Nishimura said last week the central bank will debate whether further stimulus is needed to support the economy, offering the strongest signal to date that it may loosen policy again at its next rate review on December 19-20 in the face of growing political pressure.