JAPAN’S economy shrank in the September quarter for the first time since last year, data released yesterday showed, adding to signs that slowing global growth and tensions with China are nudging the world’s third-largest economy into recession.
The 0.9 per cent fall in GDP was in line with expectations, although a fall in capital expenditure was far steeper than forecast.
Domestic firms including Sony and Panasonic have slashed spending plans to cope with massive losses as they struggle with competitive markets and a strong yen.
GDP was down 3.5 per cent compared to the third quarter of last year, the data showed.
“External demand was the main drag, as exports fell by five per cent, but shrinking domestic demand also weighed on activity,” Capital Economics said in a note.
Capital’s economists forecast a 0.2 per cent drop in Japan’s GDP for the final quarter of the year.
Many analysts expect the Bank of Japan to leave policy unchanged at a review next week, but some see it boosting stimulus again at a 19-20 December meeting, shortly after the US Federal Reserve is due to meet.
A row with China over sovereignty of some islands in the East China Sea have sparked violent protests in China and the boycott of Japanese goods, which added to the slide in exports, particularly for automakers such as Nissan.
Masamichi Adachi of JP Morgan Securities said business investment would fall again in quarter four.
City A.M. Reporter