Japan's economy contracts as recession looms news
12 November 2012

Japan's economy contracted at a pace of 0.9 per cent in the three months through September, according to government data issued today, with sluggish imports compounding a slowdown in demand which nudged the economy toward recession.

The gross domestic product was down to an annualised 3.5 per cent contraction in a reversal from Japan's robust performance earlier this year, when it performed better than most of its peers in the Group of 7 industrialised nations.

Growth has stalled since on falling exports amid economic woes in Europe and a damaging territorial standoff with China.

Competitiveness of Japanese exports had also taken a beating due to a strong yen. Slowing pace of reconstruction following the earthquake, tsunami and nuclear disaster had also hit growth at home with private consumption falling at the greatest rate since early 2011.

''These are tough numbers,'' prime minister Yoshihiko Noda told a parliamentary session today. He added, the government, which had undertaken the post-disaster reconstruction effort with ¥20 trillion, in spending, would consider further measures ''with a sense of urgency.''

However, according to some economists the Japanese economy would continue to shrink in the next quarter, landing it in a recession before conditions improved.

In the event of Japan's rocky relations with China worsening though, the recovery could take longer, according to economists. A spat over a group of islands in the East China Sea that both nations claim has prompted some Chinese consumers to boycott Japanese brands, that might hurt China's exports to its neighbour.

Meanwhile, Asian shares fell today in morning trade as Japan's economy contracted at the fastest pace since the earthquake last year, even as China's exports registered an increase.

The MSCI Asia Pacific Index shed 0.2 per cent to 121 as of 10:54 am in Tokyo while Japan's Nikkei 225 Stock Average lost 0.6 per cent on reports showing gross domestic product contracted an annualised 3.5 per cent in the three months through September.

Australia's S&P/ASX 200 Index changed little while South Korea's Kospi Index declined 0.4 per cent and Hong Kong's Hang Seng Index rose 0.1 per cent even as the Shanghai Composite Index was up 0.4 per cent.

China's exports were up 11.6 per cent from a year earlier, according to the Beijing-based customs administration. Imports were up 2.4 per cent, the same pace as the previous month. The trade surplus was up at $32 billion, the biggest in almost four years.

In Europe, bailout prospects for Greece continued to remain uncertain even after the debt-stricken country yesterday won a parliamentary approval for the 2013 budget law.





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Japan's economy contracts as recession looms