Japan's economy contracts as recession looms

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.