Japan suffers third quarter of falling output despite stimulus

 
Ben Southwood
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THE JAPANESE economy declined for the third successive quarter in the final three months of 2012, despite the impact of the first elements of radical stimulus policy.

Japan’s GDP shrunk 0.1 per cent in the fourth quarter of the year, according to official statistics from the country’s Economic and Social Research Institute, released yesterday.

This came despite a monetary policy that was already effectively easing in advance of the

26 December election of Shinzo Abe, whose plan to unleash an avalanche of fiscal and monetary stimulus had been well signposted.

Though the Bank of Japan (BoJ) yesterday said the Japanese economy “appears to be bottoming out”, the worse-than-expected output numbers may lead the new Premier to put further pressure on rate-setters to intervene with yet more stimulus and boost inflation up to the two per cent target.

But yesterday’s BoJ minutes saw the monetary policymakers slightly increase their target interest rate from 0 per cent to 0.1 per cent, while keeping their asset buying and lending programmes.

And BoJ boss Masaaki Shirakawa yesterday defended recent tranches of stimulus as aimed at reviving the economy and not weakening the yen, after G20 leaders condemned policies aimed to manipulate exchange rates as “currency war”.